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Comprehensive Guide to Freight Invoice Factoring


September 14, 2018

When you’re on the road, you need to make sure you can afford to maintain your truck as well as your business. Cash flow is critical to truckers and trucking companies, which is why we have a solution —freight factoring services.

What exactly is freight factoring?

Freight invoice factoring allows trucking companies of all sizes to immediately receive cash from unpaid invoices. With money in hand, companies can pay for materials, employees and overhead costs. While invoice factoring used to be uncommon, it’s quickly become one of the most popular funding methods for trucking companies.

Trucking companies can choose from two types of factoring services —recourse and non-recourse factoring. While many companies offer both, there’s a significant difference between them.

  • Non-recourse factoring— Non-recourse factoring contracts protect you in the event that your clients don’t pay the factoring company. If your customers fail to pay their bills, you won’t be held financially responsible. In a non-recourse agreement, the invoice factoring company assumes the risk. The fees will generally be higher for non-recourse factoring, but it’s the better choice for trucking companies that cannot afford to take the risk if a debtor goes out of business.
  • Recourse factoring— In a recourse factoring arrangement, your company is ultimately responsible if the debtor does not pay the invoice. The fees associated with a recourse factoring contract are often less because you are sharing in the risk if the debtor fails to pay. To minimize the risk of non-payment from your customers, the invoice factoring company provides credit checks on your debtors (clients), allowing you to make better informed decisions prior to taking the load.

The process of freight factoring

The first step is easy, and you’re already doing it: deliver your load as you normally would. Then, you need to submit a copy of your freight bill, frequently referred to as a BOL (bill of lading), to an invoice factoring company. Most invoice factoring companies accept paperwork by email or FAX.

The best invoice factoring companies also offer the ability to upload paperwork through a web portal. Once received, the factoring company verifies the invoices and works with your customers to collect payment. You receive your money — typically same day — once the factoring company verifies that the load was delivered and to check to see if any fuel advances were taken. If you are on a recourse program, you will receive the agreed upon advance rate within 24 hours from the day the BOL was submitted. Finally, once the invoice is paid by your client, the reserve is released minus your factoring fee.

The benefits of freight factoring

What makes freight invoice factoring appealing is its many advantages over other financial solutions. Factoring is a great financing option because:

  • It’s easy to receive financing—Traditional loans and other long-term financing solutions are often harder to get. If you don’t have the best credit, invoice factoring might be the most viable option for you. Your customers are paying the invoice factoring company, so your customer’s credit is typically more relevant than yours.
  • Speeds up your operating cash flow—It’s no secret that carriers need to be paid, and they need to be paid what customers owe them. Unfortunately, this can take anywhere between 30 and 90 days. Invoice factoring allows freight brokers to provide advances to trucking companies on the same day. With all the work you’re doing, there’s no reason why there should be a waiting period standing between you and your hard-earned money. In addition to freight factoring services, you may even receive complimentary offerings, such as tire discounts or a fuel discount card from the factoring company with negotiated discounts at many participating retailers.
  • You’ll have money to spend on growing your business— Usually, it’s more difficult to take on more jobs if cash flow is tight, but freight invoice factoring alleviates this issue. It’ll be much easier to meet growing demand because you’ll be able to use the cash to hire more drivers or for other day-to-day expenses.
  • There’s no debt to repay— Invoice factoring helps you avoid taking on new debt. It isn’t a loan, so there’s no expectation to pay anything back. There are no interest rates or hidden fees—just a small, one-time payment taken from your load.

It’s essential to familiarize yourself with the invoice factoring process and its benefits, but there’s another piece of information you should keep in mind as you decide whether freight invoice factoring is right for you.

The application process for freight factoring services is pretty simple.  Most freight factoring services require you to complete an application providing basic information that pertains to your business entity.  Invoice factoring companies primarily are looking at the debtor’s credit (not your credit) since it is the debtor who will be paying the invoice.

The application paperwork is fairly straightforward, and factoring companies can approve your application for funding quickly. In fact, it generally takes only two to three days to receive approval.

Why you should use a freight factoring company

Provides you with immediate cash flow.

  1. We already mentioned the amount of time it may take to process payments, and emergencies can’t wait. This is why you should start out with an invoice factoring company as soon as possible.

Get access to funding even if you have bad or no credit.

  1. When you’re operating a newer business, you probably haven’t established a line of credit. Invoice factoring provides your business cash flow even if you have limited or poor credit history.

Saves you time and money on collections.

  1. For one thing, using an invoice factoring company can also help alleviate the stress associated with invoicing and collections. The invoice factoring company handles the general accounting responsibilities, such as collections and accounts receivable paperwork. By handing off your invoices and letting invoice factoring companies manage the back-office work, you can have peace of mind and the time to focus on other tasks.

Provides flexible contract terms.

  1. Invoice factoring companies offer flexibility. There are no long-term contracts, and you can submit as many unpaid invoices as you’d like. Once you’re approved, you can decide how often you’d like to use invoice factoring services to fund your business. Many invoice factoring providers do not have minimum requirements, meaning you can pick and choose which loads you’d like to factor.

Every business owner knows that there are going to be fluctuations in your business, so it’s important to prepare with the right financing option. You can use a factoring service when you need to, so you won’t be stuck on the road when you need the cash most.

Don’t miss out on opportunities to make money, and don’t let your invoices affect your company’s growth. Work with a partner who will give you a fair, honest and stress-free experience.

When it comes to invoice factoring companies, we stand out from the rest. Triumph, formerly known as Triumph Business Capital is dedicated to your unique needs. With over 100 knowledgeable team members, we can help you manage your business, get you the funding for your business and save you time and money.

Triumph, formerly known as Triumph Business Capital truly is a preferred source for freight factoring services. We’re able to pay carriers within 24 hours after a load has been delivered. If you want a steady flow of capital to help your business continue to grow, call us today and convert your accounts receivable into cash.