The trucking industry is the backbone of the nation’s economy. The transportation industry employs over 13 million Americans (about 10% of the U.S. labor force) and moves trillions of dollars worth of goods every year. Without trucking, commerce would grind to a screeching halt and products would never get to where they need to go. Cash flow can be a cause of concern for trucking companies. Transportation companies often struggle with long wait times for payment but must cover recurring expenses like gas and payroll. Transportation factoring (also known as truck factoring or freight factoring) is the solution to growing your freight business despite cash flow challenges. Truckers rely on factoring to provide cash for fuel, repairs and day-to-day expenses.
The process of transportation factoring refers to the sale of accounts receivable at a discounted price. A trucking company sells their unpaid trucking invoices to a transportation factoring company and receives up to 97% of the amount in cash within a few hours. Then, the remaining cash is returned, minus a small factoring fee, once the trucking invoices are paid in full. Alternatively, some factoring deals involve a flat rate, allowing the trucking company to collect their money all at once. Transportation factoring is a simple process, and approval is likely if the truck company has creditworthy clients.
Transportation Factoring Services
Occasionally, customers fail to pay their invoices. This can affect the way a trucking company chooses to factor their accounts receivable. Trucking companies can either be liable for unpaid truck invoices and pay lower factoring fees or choose to be free of liability and pay higher transportation factoring fees. These transportation factoring options are referred to as recourse factoring and non-recourse factoring.
Recourse Factoring- In recourse factoring, the transportation company takes on the liability for customers who default on their payments. The benefit is that regular rates are lower than they would be without liability. This is a good option for larger trucking companies who have the resources to cover bad debt expenses should they come up.
Non-Recourse Factoring- The non-recourse factoring option means the factor is liable for all bad debts with respect to invoices. However, it also means higher overall rates in order to offset the liability cost for the factor. This method is usually for smaller companies that can’t afford a bad debt out of pocket.
Benefits of Transportation Factoring
• Immediate Cash- get cash in less than 24 hours
• Eliminate Overhead- costs associated with processing invoices and handling collecting eliminated
• Unlimited Capital- factoring is the only source of financing that grows with your sales
• Bad Credit, No Problem- only customers’ credit history is taken into account
• Flexibility- factor only the invoices as you want thanks to no minimum volume requirements
Truck factoring is a good solution for companies facing cash flow problems. If you have a trucking company that needs cash flow solutions, contact EZ Invoice Factoring today.