For small fleets, long payment cycles in the trucking industry could easily hamper business growth. Worse, some truckers may end up getting into bad debts or out-of-pocket to cover operational expenses. The good news is that a factoring company for trucking offers a financial service to prevent you from facing the same dilemma.
In this post, we will share with you how factoring for a trucking company can deliver a financial advantage. Keep reading to see if this is the solution you need for your trucking business.
Benefits of partnering with a truck factoring company
Factoring services for trucking companies are a great financial partner, whether you have a single truck or a growing fleet. Here’s why more and more trucking businesses are opting for this funding option:
- Faster cash payments. In the trucking industry, it’s typical for invoices to take 30, 60, and up to 90 days to get paid. The good thing is that freight factoring services can advance the invoice amount in as little as 24 hours. This way, you’ll get your working capital to cover fleet expenses.
- Funding flexibility. The best factoring company trucking can give you financial freedom through flexible funding. They will let you choose which invoice you want to factor and when. In this case, you can choose to factor open receivables from slow-paying clients to ensure a steady cash flow for your trucking business.
- Customer credit checks. A factoring for trucking company can also provide credit checks on your customer before they fund the invoice. This is to ensure that your client is in good financial standing and can settle the balance.
- Avoid bad debts. Many truckers fall prey on loans with high interest rates that only hurt their finances in the long run. Instead of struggling with the same situation, you can consider factoring truck invoices instead. Aside from that, factoring doesn’t require extensive paperwork and approval can be as fast as 24 hours.
How to choose the best truck factoring company
Selecting the right factoring company to work with will make a big difference in your fleet’s financial freedom. Here are some aspects you should check first:
- Opt for fast approval. The best trucking factoring companies can approve your application in as fast as 24 hours. This way, you can start factoring and receiving funds right away.
- Check its funding capacity. A huge funding capacity says a lot about the reliability and credibility of the factoring company. This is a very important consideration, especially if you have a growing fleet.
- Ask for their minimums. A factor that doesn’t require a minimum invoice volume is also a good choice. This way, you can explore factoring trucking receivables on your own terms.
- Inquire about other services. A factoring company for brokers and truckers may also offer additional services to streamline your finances. Some would offer fuel cards, fuel advances, accounting for trucking, and so on.
- Check their contract terms. You should also read what the factoring company includes in the fine print. See their termination fees and clauses, maximum advance rates, recourse and non-recourse factoring rules, and so on
Factoring FAQ
Do I need a factoring company for trucking if I only have one vehicle?
Whether you have a single truck or an entire fleet, factoring would be a convenient financial solution. You can choose to sell invoices from slow-paying clients to factors, so you’ll receive the funds right away.
What does a factoring company do after they purchase my receivables?
After a factoring company purchases your invoice and advances a huge chunk of its amount, they will take over the collections process. They will handle follow-ups on your clients until they settle the invoice as soon as possible. And once the factor collects the invoice, they will send you the remaining balance, minus their small fee.
How much does invoice factoring cost?
Factoring companies have specific pricing structures, so it’s best to consult with your prospective provider. Some would offer a flat rate, while others work on a percentage basis. Whichever you choose, make sure it’s financially sound for your trucking business.
Do I have to factor all my trucking invoices?
No, you don’t have to factor all your open receivables. Most factoring companies allow you to choose which invoice and when you want to factor them. This flexibility gives you more financial freedom and control over your cash flow.
For example, you can factor invoices from slow-paying clients and retain the rest of your receivables collection in-house.
Conclusion
The trucking business is notorious for lengthy payment cycles, but factoring helps cushion the blow. Instead of waiting up to 90 days, a factor can advance as much as 97% of your invoice value within hours. It’s a great solution for small fleets who want to seek new growth opportunities.
If you’re interested in freight factoring, make sure you look for a reliable provider to partner with. This way, your funding will grow with your fleet.
