The Federal Motor Carrier Safety Administration says that approximately 5.9 commercial motor vehicle drivers operate in the US and nearly 12 million trucks, rail cars, trains and other vessels move goods over the transportation network.
When it comes to trucking, money is essential to keep the industry going. But in some circles, there’s the perception that all trucking financing is one and the same. But that’s hardly the case and picking the right type of financing can be a big factor in the success of a business.
One of these types of financing is load factoring and it offers several advantages for trucking and logistics companies:
- Advances: Many trucking companies use freight bill factoring as a way to get paid sooner for the loads they deliver. With load factoring, freight factoring companies buy a carrier’s freight invoices at a discount, sometimes advancing as much as 95%. If a carrier is in need of money, these advances are very beneficial and help truckers avoid long waits to get paid.
- Doing more work: Since freight factoring companies can help improve a trucker’s cash flow, carriers are able to take on more loads and help more customers. This is made possible because the advances provided by freight factoring companies acts as a quick pay, which gives truckers the money they need to get jobs done.
- Flexibility: One of the biggest advantages of freight factoring and load factoring is that a line of financing can help truckers make more money. How is this possible? Factoring lines of credit can usually be increased as long as customers meet certain criteria. A financing line can help solve an immediate money problem, but it can also help in the future, since truckers can take on more loads and don’t have to wait forever to get paid.
- Better customer quality: Many freight factoring companies will periodically review the credit of the customers a carrier is serving. This helps figure out which customers have consistent payment habits, so carriers can then with better customers. Nearly 60% of invoices are paid late, so having a factoring service buy your unpaid invoices and then figure out which customers pay on time, will help truckers better determine who they can work with.
- Fast approval: Another benefit that freight factoring companies can offer is quick financing. Lines of financing are typically approved within a day. Why is this important? Quick financing of lines allow truckers and transportation companies to have access to money if they run into some sort of cash flow emergency.
Before a trucker or trucking company goes into business with a freight factoring company, there are several things to consider:
- Approval rate: Working with freight management companies should be easy. If your customers are creditworthy, then most credit lines should be approved. Ideally, you want to find a company that won’t hit you with a bunch of application fees if you’re applying for credit.
- Services: When it comes to trucking, freight companies should offer additional services beyond just freight management. These include online access to your account, free credit checks, fuel card programs or rewards programs and insurance assistance.
- Contracts: Before locking into a factoring agreement, know what’s in the contract you’re signing. The last thing you want is to be locked into an agreement with a company that isn’t doing what you need it too. Find one that offers flexible terms.
- Fuel: Working in the trucking industry requires a lot of fuel. Some load factoring companies offer fuel advances for truckers; sometimes it can be as much as a 50% cash advance for fuel once a load is picked up.
No matter the size of a trucking company or its credit score, freight factoring offers plenty of benefits for trucking companies of all kinds. It can help companies get fast access to money, allows them to take on more work and helps them work with a consistent, good paying clientele. Transportation factoring companies also offer plenty of flexibility, but truckers and trucking companies should take care to find a reputable company before going into business.