How Transportation Factoring Works

Transportation Factoring

How Transportation Factoring Works is a complete review of an explanation of the benefits of the factoring process. If you have a trucking business, you’ve almost certainly heard of business factoring and could quite possibly have already linked up with a freight factoring service that handles your invoicing for you. Even so, there are some nuances in how different trucking factoring companies handle their businesses that you may not be aware of.

The concept of transportation factoring is pretty simple. A trucking factoring company, also called a transportation factoring company or freight factoring service, buys your freight bills and offers you money for them upfront. The freight factoring company charges a small fee for their service, and in exchange you have a consistent incoming cash flow and no collections nightmares. You can put your attention on delivering additional loads while the truck factoring service handles your billing needs.

The speed at which freight factoring companies pay their clients can vary greatly. Some factoring companies pay their customers right away, others wait until the next business day, while others only give you your money once they verify the bill with your customer.

The fees that the truck factoring company charges can be quite different from one company to the next as well. Are they offering recourse or non-recourse funding? If the trucking factoring company is assuming the risk for the debts, they may charge a higher fee than if you are taking on the risk in the event your client doesn’t pay. Other factors involved in how much the factoring service will take out include the number of invoices you factor, their size, how long the invoices have been outstanding, and so forth.

transportation-factoring5A third way accounts receivables factoring companies can vary is in how they handle invoicing. For example, some services want you to invoice your customers directly and send copies to them, while others do the invoicing themselves. Which way works best for you? If you have a relatively small business, doing the billing yourself may be a piece of cake and worth it to avoid being charged by your factoring service.

On the other hand, if you have countless clients and invoices to deal with, not to mention the costs of maintaining a billing station (postage, printer ink, time, etc.), keeping a billing office of your own is probably more trouble than it’s worth.