Paying for expenses is easy when you factor your freight invoices. Having money in your account is important since you are able to meet expenses and unexpected emergencies.
Typically, a trucking company will complete a delivery and wait 30 to 90 days to collect payment on an invoice. In the meantime, they run many more loads and have to put gas in their trucks, keep them serviced, and pay their employees. As they are waiting to get paid, they are spending a lot of money on operating costs and overhead. In simple terms, factoring gives you immediate cash to operate your business without waiting for slow paying customers, which stimulates your cash flow and increases operations.
By selling invoices to a transportation factoring company, you gain access to virtually immediate cash flow, allowing you to meet your financial obligations and take on new jobs. In short, it ensures that you’re able to run a successful freight business.
How Does It Work?
Here’s how the straightforward process of transportation factoring works:
- you deliver your load as normal
- you send a copy of the invoice to a third-party factoring
- that factoring company buys the invoice from you, paying you an advance of up to 97% of the value (minus a nominal factoring fee)
- the factoring company then collects the invoice on your behalf from your customer, at which point the remaining 3% held in reserve is paid back to you
A number of factoring companies specialize in the trucking industry, which means that they can also offer you additional services besides simply providing you with funding. Some secondary benefits include:
- Transparent factoring rates that vary based on the needs of your business
- Same day funding
- Added risk management through free credit checks to help you screen prospective clients
- Collection on your behalf
- Fuel advances & fuel cards
How Much Does Factoring Cost?
Normally a factoring company will pay you upwards of 90% of the face value of your invoices. One factoring company, Accutrac Capital, will pay 97% of the invoice value upfront (less their factoring fee) and the remainder when the invoices are collected. Plus, you are no longer required to spend the time and effort collecting invoices yourself. Instead, your factor covers that responsibility for you. All you have to do is keep making deliveries and getting paid.
Factoring also allows you to avoid borrowing terms and rising interest rates. This is because borrowing money from traditional lenders can be time-consuming and costly, while factoring is not a loan at all — it’s simply the process of selling invoices upfront at a discount.
It’s easy to grow and expand your business when you are sure that you will get the cash you need on time. Not having to rely on slow clients to make slow payments frees you to grow your business. Planning for the financial future of your business becomes easier with transportation factoring.