Freight factoring is a specialized service where a factoring company buys the bills of lading you use to invoice your brokers and shippers. The factoring company pays you the money you’re due, minus fees. The factor then gets to work invoicing your clients and collecting that payment they advanced to you.
Freight factoring rates vary greatly from one company to the next. They also are very dependent on several different criteria. One of those criteria is your fleet size. When you have one or two trucks, your rate will be higher than a company with ten or more trucks. Essentially, there are volume discounts in play.
More Business Equals Lower Fees
Volume is the best way to get lower rates when you’re factoring invoices. Think of it as buying in bulk. When you purchase a full case of paper towels, you may pay more upfront, but the per-item rate is lower.
Freight factoring is similar. The more invoices the factoring company is able to buy from you, the more business/money they make, so they can afford to lower the fee for that reason. A company with one or two trucks will not transport the same volume as a company with 15 trucks handles. So, the company that has more trucks and, therefore, volume benefits with the lower rates.
For now, a smaller trucking company may have slightly higher rates, but invoice factoring allows you to grow your business. As you grow, the rates decrease. And, you never have to factor every invoice with Saint John Capital. Pick and choose which broker or shipper you want to have our factoring company handle. The others are left for you to take care of.
You no longer wait weeks or months for your client to pay you. You get paid the same day or within a couple of days, so you pay bills on time, increase your business credit score, and get positive word-of-mouth reviews, all of which help you expand and grow.
Other Services That Help You Run Your Trucking Company
Freight factoring is one of the services that helps you grow and manage your trucking company. There are several others that you should consider.
Payment Upon Pickup
Do you have to wait until you’ve delivered the load or can you request the payment after picking it up? If you can get cash before delivery, especially when you’re starting your business, you’ll have money available for drivers to fill up their tanks.
When your drivers are on the road, can you keep track of their location? You should be able to. Your client may call and want an ETA. If you have no idea where your driver is, you can’t give that ETA. Being able to quickly use an app to track loads is important.
Plus, this app allows you to assign loads. You have a driver who is in the process of unloading a trailer. You could assign a new load for that driver to pick up before leaving town.
Load-finding apps are essential if you have trucks that often make runs with a partially empty trailer. If you have a job from one broker that only takes up a portion of your trailer, it’s smarter to use a load-finding app to find another partial load heading to the same city or town. Double your money on the same run and find loads for your drivers to haul when heading home.
Free Credit Reports
Free business credit reports go hand in hand with a load-finding app. You see a load that appeals to you, but you’ve never worked with that client. You can check that company’s business credit report for free and see if they often pay late or have missed payments.
Low-Interest Business Line of Credit
Does the freight factoring company offer a business line of credit? If you’re considering taking out a business loan to purchase new trucks or expand your building, a business line of credit may be essential to your growth. You want the lowest interest rate and best repayment terms.
Company Visa Card
Do you require your drivers to pay for gas and get reimbursed or do you hand them some cash before they leave? It’s time to change. Sign up for a company Visa card and make sure your drivers have a card to use for fuel purchases. The Visa is also a fuel discount card, so your drivers can save a lot of money with each fill-up.
A company Visa allows your drivers to pay at the pump, which is much faster. And, it helps prevent situations with lost or misplaced money.
Always Check Contract Terms Before You Sign
Whether you’re a small or large trucking company, invoice factoring helps you get paid quickly. You’re not in a panic over late bills or unpaid employees. Freight factoring benefits companies with one or two trucks or sizable fleets with dozens of trucks. Before you sign any contracts, make sure you understand the fees.
Are You Paying a Flat Fee?
Some companies use flat fees, while others charge additional (per) transaction fees, invoice fees, etc. Check if there’s a start-up or application fee. You shouldn’t have to pay to sign up for freight factoring.
Look for a company like Saint John Capital that offers flat fees, the lowest possible freight factoring rates, and low bank fees. Our rates are as low as 1% when you have a fleet of 11 or more trucks. Even if you only have one or two trucks, our rates are the lowest you’ll find.
Will Your Bank Charge Additional Fees?
Your bank likely charges an ACH fee, but you could sign up for a business Visa to get paid directly to that card and avoid banking fees. Signing up for a business Visa benefits you in other ways, including same-day payments and substantial fuel discounts.
How Much of an Advance Do You Get?
We offer 100% advances, meaning we pay you the full amount due and not just 85%, 90%, or 95%. Some companies will hold that extra 5%, 10%, or 15% as collateral until your client pays. You get it once your client pays, and if they never pay, you lose out. While a partial payment is better than nothing, it might not be enough to cover your bills. Saint John Capital pays you 100% of the amount you’re owed minus fees.
If Your Client Doesn’t Pay, Can the Factoring Company Demand Repayment?
The final thing to consider is if the invoice factoring arrangement is recourse or non-recourse. With non-recourse, the factor will not come after you for repayment if the client never pays. Recourse allows a factor to demand you return the money you were advanced. An unexpected repayment can be devastating to your savings.
Fill out the online form to learn more about Saint John Capital’s rates, freight factoring arrangements, and other helpful trucking industry services.