Is cash flow an issue for your trucking business? If so, you should consider freight bill factoring. You need funds to pay expenses and grow your business, and you can’t always afford to wait 30, 60, or even 90 days for customers to pay. Fortunately, invoice factoring can help bridge the gap between when you dropped off a load, and when you get paid for it.
To give you a better understanding of freight bill factoring, we’re breaking down everything you need to know, from the application process to the benefits and more.
What is freight bill factoring?
Freight bill factoring (also known as trucking factoring) is an accounts receivable financing solution that helps trucking company owners improve their cash flow. Essentially, you sell your invoices to a third-party factoring company and quickly receive your funds back (minus a small factoring fee) for your load, so you’re able to use it for day-to-day operations. With freight bill factoring, trucking companies can immediately access funds from slow-paying freight bills.
Freight bill factoring is not a business loan. Instead, it’s a form of invoice factoring. Invoice factoring is both a short-term and long-term solution, and it’s a popular option for cash flow management. It’s an advance based on your invoices. With this advance, you’re able to pay your bills and expand your operations without borrowing funds or taking on new debt.
How does freight bill factoring work?
While trucking factoring involves a particular process, it’s actually very quick and simple. First, you’ll deliver your load as usual. After that, you’ll send a copy of your invoice to a factoring service after you confirm that you’ve delivered the load. If the invoice is approved, the factoring company will deposit money directly into your bank account in as little as 24 hours. After you receive payment, the factoring company will work with your client for payment.
Before deciding on an agreement, it’s important to remember that there are different types of factoring programs with different terms and expectations. Make sure you ask about some of the benefits of each program, and how it might affect your business before signing.
Non-recourse factoring ensures that even if your customers are slow to pay, you’ll be able to fill any cash flow gaps. This is because the factoring company assumes responsibility and protects your business from customer insolvency. That means if your customer goes bankrupt, the factoring company will not attempt to collect those unpaid invoices from you.
While non-recourse factoring is a great option for small, independent owner-operators, larger companies will typically use recourse factoring because of their potential reserves to get them through any delays in payment. In a recourse agreement, the factoring company does not offer the same protection in the event your customer goes bankrupt. For that reason, recourse agreements tend to be less expensive, in terms of rate, because the trucking company is assuming the risk of nonpayment from insolvency.
Recourse factoring is a great option if you know your customers will pay in a timely manner.
Recourse and non-recourse factoring have their similarities and differences, so carefully decide which type of factoring will benefit your company.
Invoice factoring helps with fuel advances and fuel cards
While you’re on the road, you may need additional cash to cover costs. This is why, when business owners look for factoring companies, they often search for those that offer fuel advances and discount fuel cards. Once you pick up a load, you can receive money to pay for fuel and other expenses. If you want a fuel advance, all you need to do is send a request that includes rate confirmation and a bill of lading. Once the request is approved, you’ll receive the advance in as fast as one hour.
When a factoring company provides you with a fuel advance, you won’t have to worry about negotiating an advance from a broker or shipper. This way, you can keep your trucks on the road and take on more loads with a predictable amount of money, even if you’re low on funds at first. When you begin to work with a factoring company, you’ll also be eligible for the fuel card program. A card gives drivers fuel rebates at major truck stop pumps across the country.
Some invoice factoring will even let you split your payment across different payment methods. Say you were paid $1,000 for a load. You can choose to get paid $500 to your fuel card and have the other $500 go to your bank account. A fuel card also gives you the flexibility of transferring to a single or multiple bank accounts.
Who can benefit from freight bill factoring?
At times, companies must wait a while for brokers and shippers to pay. Meanwhile, those companies also need to pay for drivers, fuel, repairs, and other expenses as they wait. Freight factoring services are an ideal solution. It’s a convenient, flexible option for trucking companies of all sizes. However, factoring is especially beneficial for startup companies that lack large cash reserves.
Whether you need to cover payroll, hire new drivers, or expand your fleet of trucks, payments from freight bill factoring are ideal. Also, if you need to improve your business credit, factoring is a great way to do so. You can quickly get paid for jobs, allowing you to pay off loans and pay your bills on time.
In addition, if you want to focus on your business and take on additional projects, you should consider factoring. Triumph offers free back office support and collections, so you can turn your attention to booking loads and hauling freight.
What are some of the benefits of factoring?
- The invoice factoring process may be cheaper than traditional loan interest rates. Furthermore, while a cash advance loan may be convenient for your business in the short term, it may not solve your working capital needs over time or grow with you as your business grows.
- There are options for every company’s requirements. There are invoice factoring agreements that have no-minimums, which means you can factor as little or as much as you want.
- You qualify for factoring based on your customers’ credit, not your own. This means that even if you don’t qualify for a loan, you may still qualify for invoice factoring.
- Some companies (like Triumph Business Capital) don’t require long-term contracts; you can factor on a month-to-month basis. But if factoring works for your business, you’re able to continue with it.
- You get a team of back office professionals who will support your trucking company with its invoices, help run credit checks on brokers and collect payments.
How do I qualify for freight bill factoring?
Whether you own a small or large fleet, your trucking business can qualify for invoice factoring. The qualification process is mostly about your customers; if their credit is strong, you’ll likely qualify.
For more information regarding freight factoring services, contact Triumph’s experienced team of professionals. We’re a preferred partner, and a proud member of the International Factoring Association. We always make sure carriers receive payment on time, and we’ll positively maintain your relationships with your customers. Give us a call today!