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Truck Invoice Factoring: Funding Your Transportation Business

Truck invoice factoring is a service that enables workers in the transportation industry to get paid quickly. You deliver a load, sell your unpaid invoices to a factor, and get paid as soon as that same day. Imagine how much easier it would be to run your business if you were no longer forced to wait weeks or months for payment.

Explore the Benefits of Truck Invoice Factoring

Despite the service you perform for retailers, consumers, and the nation’s economy, it can be frustrating when you’re waiting 30, 60, or even 90 days to get paid for the work you did. That cash flow gap is a major hassle and makes it hard for some companies to stay in business. 

Instead of juggling bills and business expenses like wages, benefits, rent, and repairs, consider truck invoice factoring. It’s a beneficial way to maintain a steady cash flow when your clients don’t pay as quickly as you’d like. Explore the benefits you gain when you sign up for truck invoice factoring.

Benefit #1 – Easier to Grow Your Business

When you pay bills late or have accounts in collection, it impacts your business credit score. A low score makes it hard to get loans for things like new cabs and trailers, a new office building and garage bays, and office equipment. It also makes it easier to hire additional drivers to expand your trucking company’s area.

Benefit #2 – Free Up Office Workers

When your staff spends hours drafting invoices, sending them out, and chasing payments, it’s valuable time that could be better spent elsewhere. Imagine what you could do if you had more workers looking for new clients, marketing your business on social media, and researching lower insurance rates.

Benefit #3 – No More Driving Away Clients

Most brokers and shippers run a credit check before entering into an agreement with a new trucking company. With a positive credit rating, you draw more clients in.  They’re not scared off due to your bad credit.

Benefit #4 – Strong Cash Flow

You have money coming in soon after making a delivery, so you have a strong cash flow. You no longer fall behind on bills while waiting for a client to pay. You’re not stressed as you try to figure out how to pay wages when there is no money coming in.

Benefit #5 – Variety of Additional Services

Most freight factoring arrangements come with additional services that help you save money and manage your business effectively. Load-finding boards are one of the most popular services. You’ll be invited to use the factoring company’s tool to find new clients.

Fuel discounts are another sought-after benefit. Instead of paying full price for diesel and gas, get a discounted rate through the freight factoring company. Imagine how much you could save each month if you had a 10, 15, 20 cent, or higher discount. 

Those are the benefits, but there can be downfalls depending on the arrangement you select. If you chose a recourse factoring arrangement, you may need to repay the amount you received from the factor. This happens if the client fails to pay. It’s more risky, but the fees are lower.

Non-recourse factoring has higher fees, but you’re also protected from non-payment. If your client files bankruptcy or shuts down without warning, you’re off the hook.

You will lose some of the money you’re owed to freight factoring fees. Typically, they’re less than 5%, but it depends on the arrangement you make and how many trucks are in your fleet.

How Does Truck Invoice Factoring Work?

When you drop off a load, you have the completed bill of lading that you turn into an invoice. Depending on your invoice terms, you might have Net 30, Net 60, or even Net 90 terms, which means the client has 30, 60, or 90 days to pay before the bill is overdue and late fees apply.

You mail, email, or fax the invoice once your office staff has it ready. The client receives the invoice and goes over the details to look for errors. If it’s approved for payment, it goes into the system with the due date specified. If you’re lucky, the client will pay immediately, but that’s not common. Most companies pay an entire month of invoices at once.

With freight factoring, you take that bill of lading, take a photo of it, and upload it to the freight factoring company’s app. They immediately start processing it for approval or denial. As long as you run a credit check to ensure the broker or shipper doesn’t have a history of late payments, it should be paid immediately.

You don’t always get the entire amount at once. The factoring fee is deducted from it and then the amount you’re contracted to get is sent to you. If you have a 90% factoring arrangement, 90% of the amount is due after the fee is sent. The remaining 10% arrives once your client pays.

If you meet the daily deadline and have a debit card with the freight factoring company, you’ll get paid the same day on that card. If not, it rarely takes more than a couple of business days.

Is Truck Invoice Factoring Right for Your Business?

It’s uncommon for a company to not find truck factoring beneficial. The best way to decide if factoring is right for your business is by asking these questions of yourself and any key stakeholders.

  • Do I have a strong cash flow currently?
  • What are the costs associated with factoring? Consider factoring rates, bank fees, etc.
  • Do I have to factor every client’s invoice? Can I pick and choose?
  • What are your goals? Are you looking to grow your business, stop having late payments, or gain the benefits of other services often included with freight factoring?

Take Your Time Comparing Companies

Compare rates from several companies before you sign with any company. The lowest rates may seem great, but weigh them against the terms and conditions. If a 1% fee means you must factor every client’s invoice, it may not be the right fit. Ask about hidden fees, too.

Don’t rush into truck invoice factoring if you still have unanswered questions. The best move is to talk to a factoring expert about the fees, arrangements, and terms. Saint John Capital has some of the lowest fees on the market. We offer customer service in several languages to ensure you feel comfortable asking as many questions as you need. We never make clients factor all of their brokers or shippers if they don’t want to. You’re welcome to pick and choose.

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