It’s no secret that demand for trucks has been down compared to 2018. If you follow trucker message boards or social media groups, you’ll find a lot of truckers wondering where all the loads went. To put it more bluntly, they’re wondering where all the high-paying loads went.
Seasonal, or even year-to-year drops in demand, are nothing new to carriers. Experienced truckers are used to the ups and downs of the freight industry. Many have watched and survived similar dips before. It wasn’t that long ago, in 2008, when the industry was hit hard by the global recession, not to mention fuel prices surging to $5 a gallon at the same time.
Right now, a lot of owner-operators are choosing to keep their trucks parked instead of taking loads that, at best, might break even or, at worst, lose money. During these lulls in the freight industry, cash flow becomes more important. If you’re taking fewer loads, you don’t have steady income to run your operations.
This is one of the reasons that freight factoring has been a tool that has been used by trucking companies of all fleet sizes, and why it’s become one of the most popular methods for carriers to finance their trucking businesses in recessions and in booms.
Let’s look at some of the three ways that freight factoring can help when business is slow.
- Freight factoring provides immediate cash for your loads
Seasoned drivers know their numbers. They know how much it costs just to turn their engines on. You hear a lot of those drivers say things like, “I won’t even turn my key for less than $X.YZ.”
If demand for trucks is down, that means that a lot of truckers are spending less time on the road, and likely have bigger-than-usual gaps between their loads. These can create a cash-crunch for trucking companies that depend on consistent payments to pay for fuel, insurance, etc.
A 2018 industry survey estimated that 91% of brokers take, on average, between 21 and 30 days to pay. That’s a long time to wait for payment even when business is good. But what about when business is sluggish?
Freight factoring provides you with an advance on your delivered loads within one business day. So even if you’re being more selective, or if you’re just hauling less than you were, you still know that the money is going to be there.
Something to remember: when an industry is down, it’s down for a lot of businesses, including brokers. Those 21 to 30 days could grow to 60–plus as brokers deal with their own cash flow issues (FYI: brokers use freight factoring services, too). With factoring, you’re not at the mercy of the industry. You get your money when you deliver the load and submit your invoices.
- Freight factoring is flexible
Let’s assume you’ve never worked with a factoring company before, and you’re worried that if business slows down, you’re still going to be on the hook for additional charges or fees.
The meter’s not running when you work with a factoring company. With many freight factoring contracts, you decide what loads you want to factor.
You might start working with a factoring company to give you a quick boost of cash between loads. Having a source of income in a slow market can be the difference between accepting a great load and having to wait until you get paid from a load you delivered weeks ago. Carriers know that this doesn’t happen. You can’t tell a broker, “hang on until I get paid in a week.”
Factoring takes the guesswork out of the equation. You know when the money will be there, and you can confidently take a load knowing you’ll have the money for fuel and other expenses.
When freight is tight, you can’t afford to turn down great-paying loads. But factoring isn’t just for rough patches, it helps you when business is booming, and you need money to finance your growth or to help collect on all the additional loads.
- Freight factoring is not a loan
Bills don’t know when money is tight. They don’t stop just because business is slow. As a carrier, there are certain bills you must pay — on time, without fail — or you’ll be parked until you do.
When money is tight, a lot of owners turn to personal or business credit cards to pay their bills. Using credit isn’t always a bad thing if you know you’re going to have the money to pay back those charges before the next month. But if you’re not moving a lot of freight, then using a credit card could set you further back, and you’ll be paying down those charges for months or even years.
Freight factoring doesn’t work that way. You get an advance, and the factoring company takes a small fee in the process. That’s it. Done. No debt to worry about. No looking back. You’re free to focus on the next load.
Plus, if business is slower than normal, adding debt will only make it harder to recover when the industry comes back. Freight factoring gives you the money you need, and the freedom to make quicker choices in the future.
Looking for freight factoring services for your business?
Triumph Business Capital offers freight factoring services that can help you get your cash flow back on track, whether business is slow or you’re looking to grow your trucking operation. To learn more about our freight factoring services and how they can work for you, contact Triumph Business Capital today.