Truck Factoring: How It Works and Why You Need It

In a perfect world, truck considering wouldn’t be essential. Trucking organizations, for example, yourself, would get arranges, convey loads, receipt customers and inside of a short measure of time get installment. After the entrepreneur has gotten installment, he or she will pay their costs, for example, truck upkeep, driver installments, fuel and suppliers.

Unfortunately, this isn’t the reality that many small to medium sized trucking businesses experience. Some clients take a long time to pay their invoices – these processes and procedures have been set in stone for decades, and there’s no way they can fast-track your payment, so you’re left waiting more than a month for your payment to arrive. To make matters worse, you’ve got drivers, staff, and suppliers who also need to be paid for you to keep your doors open (and your trucks on the road).shipping-containers-1096829_640

This is where a trucking factoring service can come in very handy. In this case, you would just follow these steps:

1. A customer books a load and sends through all the details regarding the shipment, delivery date, and rates.

2. You make the necessary arrangements and deliver the load.

3. You send the invoice to the factoring company instead of the client.

4. The truck factoring company pays a percentage of the invoice and handles the invoicing with the customer from there.

5. Once the client has paid in full, the rest of the amount (minus the factoring service fee) is paid to you.

As you can see, this simple and straightforward process allows you to get your invoices paid almost immediately, and it ensures you don’t have to worry about all the administration involved in following up with clients. It also means you don’t have to wait for weeks and months on end to receive your money.

Truck factoring isn’t necessarily ideal for each and every trucking business, but if you need to ensure your company always has a positive cash flow, then it is something you should consider. The factoring service fee usually varies from company to company, and it can be anything from 1.5% to 6% of the invoice. While this could add up to a hefty sum of money, you also have to consider the time you will save due to the fact you’re no longer on the phone, following up with clients about unpaid invoices (or standing in the queue at the bank in order to ask a loan so you can make payroll and drivers payments).

Trucking Companies Can Survive With Freight Bill Factoring

In a business such as transportation, where the productive assets are on the streets and freeways, away from the owner, it is important that the trucking company owners have a steady flow of funds to meet operational expenses. Trucking company owners need cash for fuel, repairs/breakdowns, drivers, tires, loan/lease installments, and another day to day expenses. Clients of trucking company pay their invoices in 30 to 60 days, depending on the contract, resulting in working capital shortfall which truck owners find difficult to overcome.

Most prompt paying customers still take 30 days to clear their dues. In the past, there was no option for the truck owners but to wait for the payments; one option that is gaining in popularity with the trucking fraternity is freight bill factoring. Freight factoring eliminates the waiting period and gets the freight bills paid in a few days, sometimes as less as two days! The last decade has seen the emergence of freight bill factoring as the preferred choice of truck owners. Freight bill factoring is different from any other business loan.

Freight factoring works in a simple way to, the trucking company delivers the goods and issues a cargo bill. The freight bill is then sold to the factoring company; factoring company pays up to 90%-97% of the freight bill to the trucking company as the first installment. The factoring company then waits the remaining period till the bill is due. Once the factoring company gets paid in full, it pays the balance amount to the trucking company as the second installment. However, the factoring company charges a small fee for the same.

Freight factoring rates vary, and individual companies charge anywhere from 1.5% to 3.5% for 30 days. The charges depend on the volume and duration of transactions. Trucking companies with a history of 60 days transactions are charged a higher fee than companies working within the 30-day period. The credibilitybusiness-money-pink-coins and the client profile of the trucking company are also determining factors. Trucking companies which have customers who are bad paymasters are refused freight bill finance.

Today more and more freight bill factoring companies are offering faster turnarounds as they recognize the importance cash flow in running a successful business. Freight bill factoring companies set up factoring lines in a few days. Trucking companies need to present proper documentation and prove the creditworthiness of their clients, volume, and duration to get the best deal from factoring companies. The presence of stiff competition has forced factoring companies to set up factoring lines in less than two days if the documentation of the trucking company is in order.

Almost all the major players in the freight factoring business have websites that offer instant factoring quotes and deals. They also have toll free numbers on which truck owners can speak to professionals and seek advice on the documentation required. Freight bill factoring is helping truck owners run cash flow intensive business without worrying about payments, and this enables them to focus on their core activity.


Your Truck Business And Freight Factoring

owneroperator-careersSmall-scale business business-owners and those who seek financial independence face real challenges, that’s for sure, when they’re thinking about making everything that’s possible to have a successful business. They are prone to the conditions of the market, to the moves in the customers’ preferences, their worker performance, and even – just in some cases – to the climate.

However, while there is no assurance, the freedom and the hope of important financial rewards are a gorgeous lure for those equipped with the industrial spirit. The last thing that you need as you are seeking to produce and develop your own trucking business is to be left with a considerable amount of unpaid bills for the loads that you have transported. Truck and freight factoring can assist you to deal with all these situations in a productive way, so let’s see some more info about this.

There are lots of different causes – or excuses – that a customer might present to explain away the failure to make a complete or timely payment for the services that you took such great care to efficiently render. Though this hard work may or may not dish up to decrease your negative awareness of a careless payer, it is totally certain that they will do nothing to hold your bottom line. Accumulating an excess of these deficits can cripple your trucking business rapidly, whether you are operating on your own or running a small fleet.

Methods by Which Factoring Can Assist

The day to day operating costs of long haul trucking is huge, and those who do have this type of business know it already. Profitable trucking companies acquire poor gas mileage due to the size and weight of the loads that they must drag and which radically adds to the gasoline intake necessities of a vehicle. For that reason, fuel costs alone represent a daunting demand on business accounts.

truck driver_shutterstock_220560697Adding truck maintenance and driver nutrition into the mix of the costs makes the picture even more unapproachable. With careful financial management and also with customers who uphold the contractually agreement upon terms of payment, these expenses pose little threat to your viability.

Unfortunately, even those customers who seem to be keeping their word regarding the payment and who are dedicated to protecting their own status are frequently inclined to put your interests far behind their own.
Factoring can be beneficial because of the following causes:

Instant Payment

A freight factoring company is familiar with the fact that you require access to the money that you were expecting as soon as possible, so you receive payment with a negligible hassle and delay. It will help you in running your trucking business in a proper way and with fewer worries. Finally, it will make you happy, as you will have all the bills paid on time.

Get Rid Of Your Liability

Except for intractable deception or misrepresentation, once a truck-factoring agency takes the responsibility of your due invoices, you will not have to pay them back if they fight to recover the funds. It will make you free from lots of liabilities and tensions. Also save you a lot of time which you can use to expend your business – the trick is simple: you will receive the money from them, while they will recover the money from your client.

You Can Focus

mini12As a self-governing business owner, your time and force both are of very valuable supplies and having to use up them to track down and convince nonpaying customers is ineffective, in more than just one way.

Can Invest More in Your Business

As you get the money on time, you can have more options that you can use and invest in your business, growing your activity and your profit. With the help of a factoring company, you get your cash on time and you don not have to worry if you want to do some investment in your business. With the money in your hand, or in your account, you can grow your business at ease.