Trucking Companies Factoring is a service provided by a factoring company where they purchase a trucking company’s invoices for cash upfront. Once the factoring company receives payment for those invoices, they give the remaining amount they held as a reserve to the truck company, minus a small fee. The fee can range anywhere from 1.0-2.5% for the first 30 days of the invoice, and usually increases nominally (less than 1%) every 10 days after that.
How long does it take to get set up with a truck factoring company?
Because truck factoring services understand that their trucking clients have a lot of upfront costs, Trucking Companies Factoring is a very easy and quick process to begin. The factoring company will review the trucking company, make sure its customers are reputable, and then arrange to get the company’s invoices. Once the factoring service takes over the invoices, the trucking company is able to receive their advance in less than 24 hours.
Benefits of Trucking Factoring
Trucking companies use transportation factoring for a variety of reasons. First and foremost, trucking factoring allows them to pay their drivers every week and account for additional expenses such as fuel, tags, insurance and truck maintenance. A trucking company’s drivers may get paid every week, but the company only invoices its clients every 30 days. With a trucking factoring service, a trucking company can rest assured they will have a consistent cash flow and sufficient funds to cover the demands of staying in business. The trucking company has a much clearer idea of how much money will be coming in instead of being at the mercy of its clients and when they decide to pay.
Since the trucking company typically receives around 95% of the amount of the invoice from the factoring service, they can in turn be more lax with the credit terms they offer to their customers, bringing in more business and offering a higher rate of client satisfaction.
Freight factoring offers the trucking company:
- Certainty of when they will get paid
- Zero hassle of dealing with collections and accounts receivables
- Cash to pay its drivers, fuel costs and other expenses
- The ability to accept new loads with confidence