Trucking companies understand how difficult it may be trying to run an operation while expecting invoices to be paid. Some clients might not pay until 60 days after employment has been completed.
Meanwhile, the trucking company must still pay its bills to stay their business afloat, sometimes on little or no cash. Labor must be paid and gas purchased with none cash from the client (at least not for 30-90 days).
Many trucking companies haven’t any choice but to rely on credit to stay their businesses going or risk losing everything. One option that’s beginning to be employed by many businesses within the industry is freight bill factoring.
The process of freight bill factoring is straightforward enough. It involves two things, a company’s invoices and a factoring company also referred to as the factor. The factor purchases a company’s invoices for cash then collects these invoices for a business for a fee. Typically this fee is somewhere within the neighborhood of 1.5%-3.5%.
The best freight bill factoring companies also offer the flexibility to upload paperwork through an internet portal. Once received, the factoring company verifies the invoices and works together with your customers to collect payment. You receive your money — typically the same day — once the factoring company verifies that the load was delivered and to ascertain to see if any fuel advances were taken. If you’re on a recourse program, you’ll receive the prearranged advance rate within 24 hours from the day the BOL was submitted. Finally, once the invoice is paid by your client, the reserve is released minus your factoring fee.
Freight bill factoring allows trucking companies of all sizes to right away to receive cash from unpaid invoices. With money in hand, companies pay for materials, employees and overhead costs. While invoice factoring used to be uncommon, it’s quickly become one among the foremost popular funding methods for trucking companies.
Trucking companies can choose between two sorts of factoring services —recourse and non-recourse factoring. While many companies offer both, there’s a big difference between them.
- Non-recourse factoring— Non-recourse factoring contracts protect you within the event that your clients don’t pay the factoring company. If your customers fail to pay their bills, you won’t be held financially responsible. during a non-recourse agreement, the freight bill factoring company assumes the danger. The fees will generally be higher for non-recourse factoring, but it’s the better choice for trucking companies that can’t afford to take the danger if a debtor goes out of business.
- Recourse factoring— during a recourse factoring arrangement, your company is ultimately responsible if the debtor doesn’t pay the invoice. The fees related to a recourse factoring contract are often less because you’re sharing within the risk if the debtor fails to pay. to attenuate the danger of non-payment from your customers, the invoice factoring company provides credit checks on your debtors (clients), allowing you to form better informed decisions before taking the load.
Freight bill factoring provides a trucking company with fast cash. Rather than waiting 30-90 day to get the payment for jobs they already have, they can receive it in 7 days from a factoring company. This provides companies the cash they need to pay their drivers, recoup their transportation costs, and also get new jobs, all without taking over any new debt.