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Can I Factor My Freight Invoices If I’m a Brand New Company?

As a new trucking company, you have a lot of questions. You want to grow your business, but you’re just starting out. It’s hard to get loans and lines of credit when you have no proven history. This is why one of the most frequently asked questions is if you have to be an established trucking firm to sign up for freight factoring.

With freight factoring, you get paid for the shipments you deliver soon after dropping off the load. You no longer have to wait 30, 60, or 90 days to receive payments from the broker or shipper. You complete the job, submit the bill of lading, and get paid immediately. You have funds available to pay your drivers and office staff, fuel up your trucks, and get back on the road to keep income coming in.

How Freight Factoring Works

How does freight factoring work? You’re asked to transport items from the warehouse to a store in another state. You accept the job and plan your driver’s route. The driver heads off to deliver those items and gets the signed bill of lading once the truck is at the destination and has unloaded the freight.

You now have the paperwork proving the delivery was made. You send your invoice to the shipper or broker and wait for payment. The problem is it may take months to get paid. While you’re waiting, you have bills piling up. You need to keep your trucks fueled and on the road. You have drivers to pay. Your schedulers and office workers also need their wages. Until the invoices are paid, you have no free cash for all of these expenses.

A freight factoring company works with you to collect payment. You sign a contract with the freight factoring specialist. When you deliver the freight, submit the bill of lading to them, and they pay you. Some freight factoring companies pay a reserve of 70 to 90%, while some will pay the full 100%, and fees are deducted from the money you receive. Meanwhile, the freight factoring company chases down payment to recover the money they paid you. They make money because you’ve paid those fees, which vary from one company to the next.

The fees include a percentage of your invoice. If your invoice is for $5,000 and the freight factoring company charges 2%, you’d pay $100 in fees. You also can have bank transaction fees and invoice fees added to this. If the bank transaction fee is $10 and the invoice fee is 50 cents, you’d pay a total of $110.50 in fees. That amount is deducted from the advance you get from the freight factoring company. That’s how they make their money.

When you’re a new trucking company, why don’t companies like Saint John Capital look at you like you’re a risk? After all, you haven’t proven yourself with years on the road yet. You’re not the one paying the invoice. The bill of lading establishes you’ve done the assigned job. It’s up to your broker to pay now. When a free credit check is completed before the freight factoring firm agrees to pay you in advance, it reduces the risk of non-payment.

The Benefits of Teaming With a Freight Factoring Company

Suppose you have three trucks in your trucking firm. One of them breaks down and needs brake repairs. You don’t have the cash to pay for the repairs, but you need the truck to get back on the road so that you keep earning money. When you factor your invoices, you have money coming in to cover these unexpected expenses.

Freight factoring also reduces the amount of work you do each month. You don’t need to spend hours on invoicing and collections. You won’t need to hire a separate accountant or billing agent in your office. You’re saving money on wages and benefits. Saint John Capital collects your bills of lading via the online app and submits payment to your bank or fuel card. You have a report to upload to Quickbooks or whatever software you happen to use, making it easy to balance your books.

The other essential benefit is Saint John Capital’s load board. Use your smartphone or computer to find jobs. If you have a driver coming back from New England with an empty truck, you’re wasting money. Use our board to peruse millions of loads across the country and find deliveries that fit your needs.

Things to Know Ask Before Signing a Contract

Before you sign a contract with a freight factoring company, ask the right questions. You want to know what the freight factoring rates are. They may be based on the number of trucks in your fleet or the length of the contract you sign.

Do You Charge Banking Fees?

If you plan to get paid using ACH or wire transfers, most companies pass on the banking fee. Find out what the fees are. You may end up paying $10 or more for each transaction, and that can add up by the end of the year.

Do You Penalize For Exiting the Contract Early?

If you’ve signed a year-long contract, what happens if you have to back out of the contract? Some companies charge a cancellation fee. If you found the service wasn’t working well for your needs and wanted to back out, are you going to have to pay a penalty of $5,000? That’s a lot of money to lose. A shorter contract may be better for you if you’re not sure the service is right for you.

Do You Have a Fuel Card?

If you partner with a freight factoring company that offers a fuel card, you save money on every gallon of gas you purchase with that card. Saint John Capital Fuel Card offers a 14 cent per gallon discount. Over time, the savings add up. Plus, you can have your invoices paid directly to the card, so money is always available for fuel and unexpected repairs.

You’re a new trucking firm, so you don’t have a long history of successful deliveries. While you haven’t proven yourself, that doesn’t mean you’re untrustworthy. We’re happy to help you get paid quickly. Saint John Capital works with both new and established trucking companies. Being new doesn’t automatically make you too big a risk to bother with. We’ve helped thousands of companies grow their transportation businesses from the early days. Fill out the online application to get started with our freight factoring services.

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