The transportation industry is known for its ups and downs. Pressures may be caused by increased tariffs, lack of diversification, and clients’ sudden closures or unexpected bankruptcies.
After the Chapter 11 bankruptcy of a key player in the industry, a wave of closures has swept the nation. In 2023, it’s estimated that approximately 8,000 freight brokers and 88,000 trucking companies shut down. While this eased slightly in 2024, there were still around 10,000 carriers that shut down.
While it’s great news that closures seem to have slowed, they haven’t stopped. Trucking company owners must take precautions. Transportation invoice factoring is one of the smartest ways to maintain a steady cash flow and protect your business from financial strain. Finding the best freight factoring partner is the key to success.
How Transportation Businesses Get Paid Quick
Do you understand how freight factoring works? We can break this down so that you understand the basics. Learn what your obligations are, what your factor’s obligations are, and what your client’s obligations are.
The basics of a transportation invoice factoring arrangement are like this:
- You start or complete the job.
- You submit the bill of lading for fast payment.
- Your factoring company takes over the invoicing process and chasing down payments.
- Your client pays your factoring company on or before the due date.
1. Start or Complete the Job
After searching load boards, you find a job hauling freight or whatever the item is. You and the client decide on the rate and terms. Sign the contract and set the dates for the delivery to be completed. That gets you started.
2. Submit the Bill of Lading
Once the job is complete, you take the completed bill of lading and submit that to your freight factoring partner. That factor generates an invoice and pays you the advance minus factoring fees. If you submit it before the deadline, you’ll get paid that same day. If not, you have your money within a few business days.
3. Your Factoring Company Invoices Your Client
You have the cash you need to maintain a strong cash flow and run your trucking company. Now, the factor waits for your client to pay. The factor issues reminders, if needed, and calls if payments are late.
4. Your Client Pays Your Factor, or Doesn’t
Hopefully, your client pays as promised. If it doesn’t happen, one of two things happens. One of them requires you to repay the amount you received in advance. This occurs if you went for the lowest possible factoring rate by opting for a recourse arrangement.
However, there’s the chance that you signed a non-recourse freight factoring agreement. If you did, you might be protected from repaying. If your client filed for bankruptcy or suddenly shut down, you’re protected. The transportation factor takes the loss.
Non-recourse arrangements cost more, but they’re insurance against the rapidly changing industry. We’ve seen companies with long histories in the business suddenly close their doors for good. Non-recourse factoring is an important consideration when you want access to cash instantly and don’t want to have to fight to get paid in bankruptcy court.
Points to Consider When Choosing a Transportation Invoice Factoring Partner
What should you consider when you’re looking for a factoring partner? We’ve created a checklist to help you out.
The Company:
- Do their business hours work with your schedule?
- Does that factor specialize in trucking and transportation, or are they general invoice factors?
- How long have they been in business?
- What is the president’s or company owner’s background?
- Where are they located? Can you visit their office, or do you only communicate via phone or email?
Factoring Fees and Payment Schedules:
- Are business credit checks free? Are they unlimited, or is there a limit? If there’s a limit, how much do additional credit checks cost?
- Are there non-recourse agreements?
- Are the freight factoring fees and any additional expenses clearly laid out? Do you suspect some charges are being hidden from you?
- Are there flexible contracts that you can cancel without penalty, or are you locked in for a set number of months or years?
- Can you be paid when you pick up the load, or only when you deliver it? Some companies offer fuel advances at pick-up.
- Do you get paid to your business debit card and gain fuel discounts, or do you have to wait for it to hit your bank?
- Do you have to factor every load you haul, or are you allowed to pick and choose? If you have a favorite client who always pays on time, you might not want to hand over that account to a factoring company.
- How do you submit invoices? Is there an easy-to-use app for uploading your bills of lading, or do you have to get back to the office and scan and email them?
Additional Services:
- Do they offer a load-finding platform or app? Does it support TMS integration?
- Do they offer other benefits like fuel discounts, business debit cards, or loan products with low interest rates?
- Does the app allow you to check the status of your submitted bills of lading? Does it work with GPS for instant verification of your driver’s location?
- Is customer service easy to reach? Do they offer multilingual support if you require it?
Tips to Help You Narrow Down Your Options
Now that you know what to look for, you need to reduce your options to a few finalists. Our advice is to build a spreadsheet and compare the following:
1. Freight Factoring Fees
- What factoring rate is offered by the factor?
- Is your bank going to add fees to a funds transfer?
- Are there any penalties for not meeting any quotas set by the factoring company?
- If your client doesn’t pay on time, are you subject to fees?
- If you have a busy month and need to pull extra business credit reports, what do those reports cost, or are you entitled to unlimited business credit reports?
2. Contract Terms and Conditions
- Have you carefully read all of the terms and conditions in the freight factoring contract?
- Is there anything in the fine print that is confusing or hard to understand?
- Have you asked your business attorney to look over all contract offers before you commit?
3. Testimonials and Reviews
- How are the freight factoring company’s reviews? If there are negative ones, are they something you see repeated, or was it a one-time issue?
- What do current clients have to say? Is there a testimonial page you can look at? Are you able to reach out to any of those companies?
Choose Saint John Capital as Your Transportation Invoice Factoring Partner
What makes Saint John Capital the best choice for your transportation invoice factoring? Saint John Capital shares decades of expertise in transportation with each of our clients. Our rates are among the lowest in the industry, too.
We’re one of the rare freight factoring companies to offer 100% factoring advances. While some companies limit you to 90% or less, we understand how hard you work. Get paid the full amount due, minus our low transportation invoice factoring rate. That money is available the same day you complete the job.
Saint John Capital also offers flexible options, including 50% fuel advances at pick-up, fuel cards with discounts, and seamless TMS integrations. Sign up online or contact us and end the frustration of waiting to get paid.
