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Keep Money Flowing By Factoring Some of Your Invoices

Gas and diesel prices are slowly coming down. Diesel is down about 14 cents and gas is almost 16 cents lower during the past week (7/25/22). But, other prices keep going up, and that can make it hard when you’re trying to keep up with your business’s bills. Average electricity costs are up around 12%. The overall Consumer Price Index is up almost 9%.

With costs continuing to increase the longer the pandemic goes on, the harder it is for some families and business owners to keep up with bills. Your employees may be struggling, so do what you can to help them out. Consider this, 83% of employees admitted they would rather have flexible paydays, especially on-demand pay where they ask for the money they’re owed and get paid then and there.

Have you run into issues where you’re waiting on a client to pay the last invoice, but they’re late? You have bills to pay, but you can’t do that until they pay you. If you don’t pay on time, you face late payment charges. Plus, it’s a hit against your credit score. What if there was a way to avoid the frustration and offer on-demand pay to your workers? Factor your invoices and you can.

What Is Freight Invoice Factoring?

Take a closer look at freight invoice factoring to understand how it helps you keep up with bills and offer your employees the benefits they want, like on-demand paychecks. It all starts when your driver picks up and delivers a load. Your driver gets a bill of lading after loading the trailer. Once the load is delivered and the retailer, resident, or business takes possession, the bill of lading is signed to provide proof the load was successfully delivered.

Typically, you’d take that bill of lading and create an invoice of that and possibly other deliveries you’ve made for that specific client. Your email, fax, or mail the invoice and wait for payment. If you’re lucky, your client pays upon receipt, but some may wait until the end of the month and pay all bills at once. If they pay by check, add upwards of a week for the check to clear. Plus, you might find that mail times delay the receipt of a check payment. It’s not ideal.

With freight factoring, you take the bill of lading as soon as the load is picked up or delivered and take a photo of it with your smartphone. Use the invoice factoring company’s app and send the photo of the bill of lading. If you submit the invoice before the deadline and have the company’s gas card or credit card, you can get paid that same day.

If you have to wait, it’s never more than a day or two. You get paid much faster when you factor invoices. We know what you’re thinking. It’s too good to be true, there has to be a catch. Maybe you’ve heard that factoring your invoices is a waste of money. Plenty of misconceptions are out there.

Common Misconceptions About Invoice Factoring

If you’ve been avoiding factoring arrangements due to the things you hear. We can help clarify some of the more common misconceptions.

  1. You lose a lot of money to fees

Of course, you’re using a financial service, so like any financial service, there is a fee. If you factor your invoices with Saint John Capital, that fee can be as low as 1% for your fleet. Even the fee for one or two trucks isn’t bad at 1.95%. The fee is deducted from the money you’re owed.

You might also find bank fees when you have money wired to your bank account from the invoice factoring company. Bank fees shouldn’t surprise you. They’re common. If you use an ATM at a bank other than your own, you may pay ATM fees. If you transfer more than a certain amount of times per month, you’ll pay a fee. You pay interest on loans, processing fees to get a loan, and overdraft fees. Banks and other financial companies have a variety of fees, so they shouldn’t surprise you.

  1. Once you choose to factor your invoices, you have to factor every single one

Another common misconception is that once you choose to factor your invoices, you’re stuck factoring every invoice, even those from your reliable clients. No, you do not have to factor every invoice. You’re not bound by rules requiring you to factor each of your broker or shipper’s invoices. If you have clients who always pay on time, stick with your current arrangement. Use freight factoring for clients that pay late or who are newer and you’re not sure how prompt they are.

  1. You can’t get all of your money at once

This one can be true, depending on the freight factoring company. Some do rely on a system where you get 90 or 95% of the money you’re owed. The rest is transferred to you once your broker or shipper pays.

Saint John Capital offers 100% payments. You don’t have to wait if you don’t want to. There are rules, though. If you are submitting your bill of lading when your driver picks it up rather than drops it off, partial payment is offered. If you want 100%, you need to submit the invoice when your driver completes the delivery.

  1. If your client doesn’t pay, you have to pay it back

This is another rule that depends on the arrangement. There are recourse factoring arrangements and non-recourse factoring ones. Recourse factoring does require you to pay back the money you were advanced if your broker or shipper fails to pay the invoice from the freight factoring company. Non-recourse arrangements eliminate this requirement. If your client doesn’t pay, it’s not your problem. Make sure the company you choose uses non-recourse arrangements.

How It Works

How exactly would freight factoring work? Here are two scenarios.

Your driver picks up a load and you’re due to make $5,000 for this haul. You submit the invoice to the invoice factoring company. The total fees, including bank fees, are 3%. This means you’d get $5,000 minus the 3% ($150), which is $4,850. Because you’re asking for payment before the load is delivered, you can only get 50% of the money you’re owed, or $2,425. You’d get that payment wired to your bank account or added to a business credit card/gas discount card. Usually, the money arrives that same day or the next day. Once your driver completes the delivery, you get the rest of the money.

Now, there’s also the arrangement where your driver completes the delivery. This time, you’d get the full 100% minus fees. Suppose the fees are still 3%. You’d get $4,850 wired to your bank or added to your gas card/credit card.  If the arrangement only allows you to get 90%, you’d get 90% ($4,365 of the money you’re owed. The remainder ($485) is paid when your client pays.

Once you have the payment to your card or bank account, you can pay your employees and creditors immediately. There’s no more stress hoping you’re paid on time to pay them on payday or the due date. It’s free to sign up at Saint John Capital, and you’re not locked in by rules requiring you to factor every invoice. Plus, we have the lowest rates around. Sign up today and try factoring a few invoices to see how easy it is.

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