If you own a trucking business of any size and you’re looking for better access to working capital, transportation factoring might be the solution to help you keep your cash flow healthy. If your clients have good credit, but are occasionally slow in paying on their invoices, or if the typical bank loan is not an option for your enterprise, transportation factoring may help you get out from under when your expenses exceed your cash on hand.
Unlike traditional financing options, transportation factoring can be provided quickly — often the same day you submit your invoices. This fast turnaround time frame makes transportation factoring particularly attractive to companies that need immediate cash on hand to cover fleet maintenance, driver wages and benefits, and other overhead costs.
Here’s how the process works:
- Your trucking company delivers a load as usual
- You send your factoring company an additional copy of the invoice along with all other supporting delivery documentation
- An advance of up to 97% (minus a small factoring fee) is sent directly into your account (often on the same day you submit your invoice)
- Once your customer pays the original amount owing on that invoice, the factoring company remits the remaining 3% balance to you
If you’ve ever been stuck without the cash on hand necessary to cover costs, while some of your customers are overdue on their invoices, this may be the option for you. Here are some sure-fire signs that factoring your freight bills might be worth considering:
If you’re waiting too long to get paid by your customers
If you have customers who take up to three months to pay, you could be turning your AR into upfront assets. While it’s not necessarily uncommon to wait 30, 60 or even 90 days for your slower-paying customers to pay, this kind of delay puts a lot of pressure on your business.
If you’re spending far too much time running credit checks and collections
Factoring with the right partner means investing in risk mitigation as a value-added bonus, which is to say that your factoring company will offer unlimited free credit checks on current and prospective customers to help you better vet who you’re working with. This will help you take on only the best contracts. As you grow your business, the sheer number of hours you spend on credit research, invoice processing, and collections add up, and when you work with a transportation factoring company they will provide you back office support in the form of collecting invoices on your behalf.
If you are turning down customers with long payment terms
Factoring your freight bills opens up new opportunities for companies of any size, from start-ups to large companies looking to further expand. Knowing that you can factor customer invoices at a discount means you don’t need to turn down any customer — regardless of the length of their payment terms.
Transportation Factoring Offers a Quick and Simple Application Process
Getting approved for transportation factoring is a much quicker process than getting approved for a traditional bank loan and is far cheaper than online cash advances. Even if your trucking company has been previously turned down by some lenders based on a lack of collateral or a less-than-stellar credit history, you can get set up with a factoring company trademark registration right away.