Factoring Financing: The Ideal Solution For Trucking Companies

Factoring financing provides a nearly instant, reliable source of business capital for any trucking company by eliminating the typical 30 to 60 day delay in getting paid for freight bill invoices.

In the lucrative freight and logistics industry, cash flow is a nagging problem. And this is particularly true for trucking companies, which often find themselves in need of cash to pay drivers and equipment and fuel expenses before they are paid for jobs. While many freight customers wait 30, 60, sometimes up to 90 days to pay their bills, a trucking company does not have the option to defer payroll or repair broken equipment for months at a time.

Without a significant cushion of cash or access to a business line of credit, this situation can spell ruin for even the most profitable trucking firm.

Are You Having Trouble Meeting Expenses?

A factoring program can help you with:

Payroll, including drivers and office personnel that keep the company moving smoothly and marketing for new business. 

Insurance, which is costly for these high-risk companies and is often due monthly, regardless of whether an invoice has been paid.

Fuel, which smart trucking companies never purchase on credit, in order to keep costs manageable.

Tags & registration, huge expenses when acquiring new equipment.

Advances to drivers who have on-the-road (OTR) expenses or training costs.

Today’s tough small business financing climate makes getting a loan or a business line of credit from a bank a challenging proposition at best. However, there is an alternative that is growing in popularity: a factoring financing line.

For a busy trucking company, there is simply no better and easier to qualify for small business financing available that can quickly and permanently stabilize cash flow and eliminate the constant stress of not knowing when its trucking invoices will be paid.

How Does Factoring For Trucking Companies Work?

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A factoring financing line provides cash for trucking invoices, often on the same day, or at most within a day or two from the time they are generated. Every day throughout the world, factoring companies purchase trucking invoices for a small fee and immediately advance up to 97% of the invoiced amount electronically to their freight company clients’ bank accounts. These funds are then immediately available to pay drivers, make necessary repairs to equipment and keep up with fuel expenses.

A factoring program is very different than a business line of credit or loan. Selling trucking invoices requires no complicated applications, no debt and no monthly payments. As the business grows, the amount of financing available from the factoring financing line increases automatically, making factoring financing the most flexible form of business financing available anywhere.  

Simple But Powerful Business Financing

A factoring financing line is simple to use. Here is how a typical transaction would work:

  • You deliver the load and issue a freight bill
  • You sell the freight bill to the factoring company, who pays you a first installment of from 90% to 97% of the freight bill
  • You use the money while your factoring company waits for the invoice to be paid
  • Once the factoring company gets paid, any remaining reserves (less a small fee) are returned as your second installment and the transaction is settled
Although it is common for factoring companies to hold back a reserve – the difference between the amount invoiced and the amount advanced to the freight company or trucking broker – to protect against collection losses, some now offer full advances (no reserve) to their best clients.

What Are The Qualifications For Factoring Financing Line?

Most small and mid size trucking and transportation companies should easily qualify for a factoring program. There are two main requirements to qualify:

  • Your company must do business with reputable clients or freight brokers.
  • Your company must be free of tax problems.
If you meet these two criteria, more often than not you will qualify.

Even if your company has some minor tax issues, some factoring companies will help you work around them. A good factoring consultant can quickly analyze your circumstances and recommend the best solution for your situation.

Most invoice factoring companies are comfortable working with new businesses, so you should be able to qualify even if your company is a small business start up. Best of all, you can get a financing agreement in place within a few days.

How Much Does It Cost?

The cost of factoring financing can vary from 1.5% to 3.5% per month, based on:
  • The creditworthiness of your client or trucking broker
  • The terms of the invoices and
  • The volume of trucking invoices you factor. (Generally, higher volumes are factored at lower rates.)
As is the case with “no reserve” policies, some factoring companies are now offering their best clients flat factoring financing rates to attract and retain clients.

Modest Cost For Some Big Benefits

Get Some Extras!

Some trucking factoring companies offer "goodies" to win your business:

* Same day FastPay fundings available

* No minimum fees or volume requirements - use your factoring line as much or little as you want

* Free 24/7 online account access and credit database

* Discounts with Prepass, FedEx, Trippak, and 123Loadboard 

* Free one-year ATA membership

* Branded fuel cards offering cash price plus fuel discounts

Although the main benefit of factoring financing is the reliable source of business capital and predictable cash flow it provides, most factoring companies also provide their clients with collections and credit protection as part of their service. This enables you to focus your attention and staff resources on growing your company rather than on expensive and time-consuming back office tasks.

Since the amount of available factoring financing grows automatically with your company, you will have ample business capital to purchase new equipment, hire additional drivers, and pay suppliers when acquiring new customers.

Most factoring companies buy invoices using a non-recourse factoring. With a non-recourse agreement, the factoring company bears the risk of nonpayment if your client becomes insolvent or goes out of business. Credit insurance and the increased peace of mind it provides is another excellent factoring program benefit and one that can allow you to pursue new business virtually worry free.

So, while allowing your company to reduce expenses and wasted energy on the collection and bookkeeping, factoring financing will simultaneously boost your growth and profit potential – all without the hassles, rigid rules, documentation requirements and the debt burden associated with traditional small business financing from banks.

Whether your company is new or well established
, operating and growing your firm does not have to be a financial challenge. A factoring financing line is an ideal, cost effective solution that can help you finance your way to success.

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