What Is Freight Factoring?

Freight factoring has become an increasingly popular form of financing in the trucking industry because it is a great fit for the average trucking company’s business model. Essentially, the factoring company advances you the value of your unpaid invoice, minus a small factoring fee, so that you can continue to run your business rather than following up with customers for payment. This allows you to focus on chasing leads and growth opportunities rather than chasing customers.

If you run a trucking business of any size and routinely face cash flow crises, learn what every truck driver needs to know about invoice factoring and start streamlining your available cash on hand by selling your invoices upfront at a discount. This type of financing has fast become a major advantage that American carriers of all sizes have been incorporating into their overall financial toolkit for years.

If you have customers that take 30 to 60 to 90 days to pay on deliveries you’ve already made, freight factoring becomes a very helpful tool because it allows you to secure the money you need upfront by selling unpaid invoices that are simply sitting and collecting dust in the meantime.

Also, the factoring company that buys the invoices from you then collects on your behalf, which frees up your time and energy to focus on more important things such as running your company.

When you ‘sell’ your invoices to a third-party factoring company, here’s what happens:

  • If a customer is approved, the factoring company first sends a notice of assignment to let them know that you, the carrier, have authorized collection on that invoice
  • Your factoring company will then pay you up to 97% of the value of the invoice in the form of an advance (less a nominal factoring fee)
  • The factor will keep the remaining 3% in reserve
  • They will then collect on the invoice, and the reserve will be remitted once they do

Once they receive their advance, trucking companies can use the money on whatever they need. They can purchase new equipment, they can put the money toward covering overhead, or they can use the cash on anything they deem appropriate to keeping their trucks on the road and increasing their profitability.

While some may argue that the trucking industry is in deep trouble, by speeding up cash flow through factoring invoices, thousands of U.S. trucking companies have seen their businesses double or even triple in size and revenue.

Factoring has become such a mainstream financing option for trucking businesses because it offers several key advantages:

1. Keep your balance sheet clean — Because factoring is not a loan, your accounts receivable are is converted into a liquid asset instead of adding a new liability that might adversely affect your creditworthiness.

2. Fast approval — Customers are approved quickly, and cash advances are often deposited the same day the invoices are factored.

3. Funding available regardless of size — Whether you are a small startup, or you own dozens of trucks, there is a freight factor that can help you.

4. Creditworthiness — Factors, unlike banks, base their approval in part on your customers’ creditworthiness. You may qualify for factoring even if you have poor personal credit, as long as your invoices are not committed elsewhere.

5. Back-office support — Factoring allows your freight factor to handle collections on your behalf, and provides other much-needed back-office support, so you can focus on providing quality service for your customers.

When you are suffering from a lack of cash on hand, a top-tier freight bill factoring company such as Accutrac Capital can offer the help you need. Application often takes as little as 3 to 4 days, and once they’ve been approved, you can start to receive same day advances on customer invoices. Melt away those cash flow freezes and warm up to freight factoring today.