If you’re in trucking business, you know how important it is to have steady cash flow your working capital. That’s where factoring financing comes in, to ensure trucking companies get access to advance business capital for the continuity of their operations.
While there are more than 12 million trucks, locomotives, rail cars, and vessels along the transportation network, many trucking business owners and truck operators are still not familiar with the concept of factoring financing services.
What is Invoice Factoring Financing
Invoice factoring is a type of accounts receivable financing that converts outstanding invoices due within 90 days into immediate cash for your small business. This is a financial transaction between a trucking company and a factoring company where the later sells its invoices to the former, who converts it into immediate cash.
An ideal situation for trucking companies is to get orders, make deliveries and receive payments upon delivery. However, that’s not always the case given that the standard processing time for invoices is 40 to 90 days after delivery. As such, it becomes a challenge for some trucking companies that can’t meet daily expenses such as fuel and repairs.
The duration it takes to convert invoice into immediate cash is quite important to a freight company budget, and may need to find alternative financing options to keep business running. Before the concept of freight capital factoring services became popular, many trucking companies sought for banks loans to bridge gaps in their working capital. However, this method was not sustainable especially for small trucking companies as it was both time-consuming and high-interest rates.
How Load Factoring Companies Work?
When it comes to trucking business, instant cash and quick payments can mean a difference between a job opportunity and a missed chance. Load factory companies converts invoices within the shortest time possible, but there are some incentives involved for both parties.
Incentives in Factory Financing Transaction
- Quick payment for the trucking company
- Factoring company earns profit from the percentage charged on invoices
- Working with a stable factoring company is an incentive to the trucking company
While there a cost associated with factoring services, this type of advance business capital helps small and privately owned companies to meet operational expenses and avoid debts. If you still not sure about factoring financing, here are the basic process you need to know.
1. A company or individual places an order that needs to be transported from point A to point B. 2. The customer hire a freight company to make the delivery. 3. You assess the competency of the customer to determine if they qualify for your services. 4 Once you verify their details, you pick the goods and make the delivery. 5. You are given an invoice that’s to mature in future date. 6. Take the invoice to a factoring company and other necessary paperwork. 7. The factory company buys your invoices and process payment within 24 hours. The factoring company then collects payment from the customer to recoup its profits.
Depending on your specific situation, the factoring process can change so it’s important to understand your position as business and consider all factors. In conclusion, load factoring companies functions differently. Sure, the help with advance business capital cash, but some companies are more focused on helping your freight company manage communication and payment collections. Therefore, take you time to find the best invoice factoring.