Trucking invoice factoring can alleviate stress for trucking companies and owner-operators who are currently facing account receivable issues and other additional benefits. Starting a trucking company in such a competitive industry has many inherent challenges that can easily bankrupt any business. Freight factoring is expected to grow even more in the coming years. Grandview Research mentions how the global factoring market is rapidly expanding at a CAGR of 8.4%< but actual growth may supersede that rate as the effects of the e-commerce explosion and the current peak become more evident. Having to wait on payment can make the entire company suffer and cause problems with cash flow, bad debt, and increasing stress. A solution for this problem is freight factoring, which can benefit carriers of any size and longevity.
What is Freight Bill and Invoice Factoring?
Freight bill factoring occurs when a company buys the shipment invoice with cash, removing the average wait time for payment. A company will go about regular business and make the delivery but sell the invoice to a factoring company. The factoring company will then wait for payment and take that burden off the trucking company. Factoring can increase cash flow and raise capital for business growth for starting trucking companies or owner-operator trucking businesses. Freight bill and invoice factoring companies can remove the need to rely on bank loans to make ends meet or help a business that may have an extremely tight budget.
Benefits of Factoring for Truckers
Factoring continues to provide immediate payment, which can be extremely beneficial for an owner-operated business. In the trucking industry, the goal is to see advancements in the business and gain more loads. Invoicing can help carriers grow their fleet, improve cash flow, and help the company succeed in such a competitive industry.
A Shorter Payment Window
Rather than waiting the average 30,60, or even 90 days for payment, factoring companies often have same-day or next-day payments. Depending on a carrier’s financial position, this quick payment can help ensure fewer gaps in income.
For new companies especially, shortening the payment clock can improve working capital, making or breaking a business. Carriers will receive payment for the invoices directly to their bank account from the factoring company within days. As the business grows, shortening the payment window and receiving payment sooner will enable carriers to keep the business booming.
Improved Cash Flow to Take On More Shippers and Loads
Rather than waiting on payments and dealing with a backlog of charges for the business, companies can see increased cash flow with factoring. Carriers cannot financially go without compensation for operational needs such as drivers, bills, repairs, or investments.
Increased cash flow eliminates the need for financing through a bank or using a credit card to cover expenses. Companies with increased cash flow from invoice factoring companies can be more prepared in case of emergency repairs or if fuel prices spike.
Less Time in Managing Payments
For some companies, especially owner-operator carriers, a lack of workforce can make managing office tasks impossible. Rather than stressing over billing and collecting, a factoring company can handle office tasks. With less need to focus on collecting and managing payments, owners can devote more time to finding more freight bill funding and focusing on overall company growth.
For new trucking companies, time management can raise some issues and become overwhelming quite quickly. Rather than miss out on new loads due to managing office tasks or payments, let invoicing handle the stress of those tasks.
Less Risk Of Bad Debt
Bad debt occurs when a creditor owes money but is unlikely to pay the bill. Invoice factoring for trucking can protect a company from bad credit and losing money on the delivery, depending on the factoring option. Companies may withhold payment due to bankruptcy or simply go out of business, but with non-recourse factoring, that will not affect your business.
Non-recourse factoring will take responsibility if the client does not make the payment and takes the loss. If a shipper does not pay for the delivery, even in the case of insolvency, the factoring company will take the downfall over the carrier’s business. Factoring can provide safety for the carrier and the funds to ensure their services will always receive payment.
Easier to Manage, Less-Stressful
Without freight bill factoring, some companies have to stress over capital, cash flow, and have the constant fear a repair may require funds that are not available. Rather than worry about the “what-ifs” and what could go wrong, business owners will have immediate cash on hand.
In such a competitive market, the best invoice factoring service can provide new businesses with a distinct advantage. Additionally, factoring companies can remove the stress of worrying about payments by determining the shipper’s ability to pay. Invoice factoring companies taking charge of the office tasks can help carriers who choose to go with recourse factoring over non-recourse.
Better View of Your Company’s Financial Health
Invoicing can provide leverage with suppliers and vendors by making the company more stable with sufficient funds. Increased cash flow and working capital can provide more opportunities for savings and negotiable terms with shippers.
For a new trucking company just starting out, having a favorable outlook on the company’s finances can increase the likelihood of finding brokers.
Pre-Onboarded Brokers With a Positive Credit History
Working with some companies that offer factoring trucking receivables can provide even more benefits than on-time payment and increased cash flow. Some factoring companies even provide a list of the reliable brokers they have worked with to ensure consistent loads.
Some payment solution providers can also provide electronic platforms and other valuable opportunities to find loads and freight brokers. Brokers on hand provide the carrier with a broker with a positive credit history to ensure the payment will be received.
Lower costs Than Traditional Financing
Instead of factoring, some carriers try to use a more traditional means of financing through a bank with asset-based loans or lines of credit. A bank will have a timeline of when the company must pay back the money used for the loan. Additionally, the bank will limit funds for a loan, which will not change even if payments are no longer needed.
With a bill factoring company, the limit and terms have the potential to advance over time, meaning the more your business grows the longer the relationship develops. Banks can also have a longer approval process that could take a few months; factoring companies, on the other hand, can usually deliver payments within two days.
Few, if Any, Long-Term Contracts
Some banks or other finance options try to keep a company in contract longer than desired or needed. A wide variety of invoice factoring for trucking companies can offer carriers contracts with short-term time frames and flexibility.
Most invoice companies do not have a minimum requirement for invoices or contract length. As the company continues to grow and gains more loads, factoring companies can grow with your company.
Fuel Cost Tracking and Advances
Invoice factoring companies can integrate fuel cards that carriers can deposit money onto to pay for resources. Fuel cards can provide drivers with saving options at fueling stations throughout the nation. If they want, companies can have a portion of the invoice payment deposited onto the card. This provides more flexibility and it’s also one less thing the company needs to worry about.
Carriers can also receive fuel advances once the company books a load. Such advances can cover fuel charges or provide funds for pulling the load. For smaller companies that may be tight on cash, fuel advances can help grow the business.
Integrated and Value-Added Services, Like Auditing and Recordkeeping
Most invoicing companies can provide additional services besides just freight bill factoring. Factoring can also perform credit checks on shippers to help minimize the risk of working with a company that is not trustworthy.
Some trucking invoice companies can also provide advanced technology and platforms to speed up the payment process. A factoring platform or app can allow drivers to load documents at low rates and same-day transfers for payment.
Flexible Funding to Factor Some or All Invoices.
Flexible funding allows carriers to receive cash for some or all invoices without taking out a large loan. Unlike most bank lines of credit, invoice factoring companies do not have a minimum or maximum limit. This flexibility can improve stability in the business, especially for owner-operator carriers just getting started in the industry.
Factoring companies can provide funding for any size trucking business, whether a single truck or an entire fleet. Invoicing allows for flexible funding to provide immediate payment for invoices no matter how many vehicles you have.
Reap the Benefits of Freight Bill and Invoice Factoring by Choosing the Right Partner
Freight factoring and invoicing can provide carriers with faster payments, increased cash flow, and a range of other benefits. The trucking industry continues to grow and become increasingly competitive, which can raise concerns for some companies. New carriers, privately owned operations, and even large companies can quickly boost the business and see the benefits without the added stress. To see the benefits of the freight bill and the best invoice factoring service, get started with BasicBlock today.