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Triumph’s Guide to Freight Factoring Services


June 4, 2019

There are many financial issues freight company owners must manage on a regular basis. The rising costs of trucks and equipment are in direct conflict with long waits for shipping payments, and it’s a combination that can create gaps in cash flow.  Cash flow issues are one of the most common reasons why businesses fail. For many owner-operators and fleet owners, working with a freight factoring service can be a solution to slow-paying clients or for transportation companies looking for help with their invoicing and collections process.    

What is freight factoring? 

Freight factoring is a type of accounts receivable financing where transportation factoring companies advance you money for your outstanding invoices, giving you the cash flow you need to cover your expenses.  Freight factoring services will usually pay between 80% to 95% of the value of your invoice up front and pay you the remaining balance (minus fees) once your customer pays their invoice. Freight factoring is beneficial to many businesses, but especially freight companies that need immediate payments to keep their trucks on the road and operations moving. These advances can be used to make truck payments, pay insurance premiums, buy new tires and fuel and ultimately pay yourself.  

How does freight factoring work? 

Freight factoring, which is also called transportation factoring, can help you get a handle on your credit and business finances. Here’s an overview of how freight factoring typically works: 

  1. You submit a freight factoring application for freight factoring services. When the application is approved, you’ll be issued a factoring agreement. This agreement will tell you all the specifics in the contract and what your fees will be. 
  2. Your freight factoring service will determine the creditworthiness of your customers. If your customers have good credit, those invoices will be approved for factoring. 
  3. You’ll send invoices to your freight factoring service, and they’ll advance a percentage of your invoice’s value. The factoring company will work to collect the amount from your client.  
  4. When your client pays your invoice, your freight factoring service will deduct the factoring fee and return any reserves, if any, back to you.

How do I know if freight factoring is right for my company? 

Freight factoring is a common accounts receivable solution for companies that depend on steady cash flow instead of sweating over outstanding invoices. But your business can still benefit from freight factoring services when your cash flow is good.  Here are a few questions to ask yourself if you’re wondering if using freight factoring services is the best financial option for you:  

  • Are slow-paying clients having a big impact on your ability to pay your vendors? 
  • Is your business credit score suffering because your clients are slow to pay? 
  • Are you spending valuable time making collection calls to slow-paying or late-paying clients? 
  • Are you confident that a broker or shipper will pay you when you take a load? 
  • Is your poor cash flow negatively impacting your business and your ability to grow your company? 
  • Are you unable to grow your company because you lack the capital to invest in your growth? 

If you found yourself answering yes to even one of the questions listed above, it may be worth your time to consider freight factoring servicesFreight factoring services let you spend more of your time on your business and less time struggling to collect from slow-paying customers.  Even when your cash flow is steady, you don’t need to worry about how you’re going to pay your employees and vendors. You can feel confident in your finances, your business credit score and your ability to expand your business when you’re ready.