Cash flow is everything when you are in the trucking business. After all, you must keep your truck on the road, so your business keeps moving, which takes money. According to Simplex Group, cash flow issues are relatively common in this industry as freight shippers might take 30, 60, or 90 days to be paid after delivering a load. When you’re running a business, this can be rather inconvenient in the long term because expenses may pile up.
To receive your money faster and focus on running your trucking business, you can use freight factoring, turning your invoices into immediate cash.
How Can You Factor Freight with the Help of a Freight Factoring Company?
Access to funds immediately instead of waiting up to three months is vital to business growth. That is where a freight factoring company steps in. Such a service is of tremendous help to all trucking companies who are getting started and do not have the capital to cover the costs of their next load until receiving full payment for the current load.
The process is simple and starts with the trucking factoring company buying your invoices to pay them immediately once they receive the freight bills. The best factoring companies can pay you within 24 hours of sending your invoices.
How Does the Freight Factoring Process Work?
When you haul a load, you will send an invoice to the shipper. Then, you must contact the freight factoring company, and they will advance a percentage of the invoice amount. This percentage is generally reserved if the shipper will not pay the invoice. But once they pay out, you will receive the rest of your money minus a small fee charged by the freight factoring company.
However, most freight factoring companies credit checks your clients so that they can minimize working with those who cannot pay. That will also help you choose between shippers you should work with or avoid. The process of freight factoring follows these steps:
- You will apply to the factoring company, and they will lay out the contract, including the fees and rates.
- Once approved, you can book a load and get a rate sheet. You will submit your bill of landing, rate confirmation, or proof of delivery for the loads you hauled to the factoring company.
- The company will verify the delivery with the shipper.
- Once they verify, the freight factoring company will deposit the payment in your account, and based on your preferred funding option, you might get the payment instantly or overnight.
- After you receive the payment, the factoring company will have to collect the payments for the lifetime of the invoice, and when they get paid by your customers, they will collect a fee and close the invoice.
According to FMCSA, whether running a small trucking business or a large one, having access to quick money and your working capital is beneficial to stay on top of your business expenses. Moreover, working with such a company will not add any debt to your company because factoring is not a loan, and nothing needs to be paid back. It will not hurt your truck driver’s credit, either.
