Freight bills can oftentimes take up to two months to be paid out, creating a significant delay for trucking companies from the time they deliver a truckload to the time they are paid for that delivery. For trucking companies who are trying to get established or expand their operations and need money sooner rather than later this delay in payment can pose problems. One method available to trucking companies to address this issue is freight invoice factoring.
Invoice factoring allows trucking companies to immediately receive payment from unpaid invoices. Invoice factoring companies provide trucking companies quick payment on their unpaid invoices, in exchange for a small fee. The trucking company can then use that money for whatever purposes they need, such as covering payroll, taking on more loads, or expanding their business.
How Does Invoice Factoring Work?
Invoice factoring is simple and easy to utilize. Most invoice factoring plans follow the same basic outline. First, the trucking company delivers the load to their customer as they normally would. The trucking company then sends the freight bill to the customer and submits a copy of the freight bill to the invoice factoring company. The invoice factoring company will then send you the advance by money wire or direct deposit. And finally, your client pays the invoice amount directly to the invoice factoring company.
How Can Invoice Factoring Help a Trucking Business?
The most obvious method in which invoice factoring can help your trucking business is by providing you with cash from the loads you deliver faster. This allows you to ensure you have sufficient funds on hand to cover costs such as fuel, vehicle maintenance and repair, containers, drivers’ payroll, licensing fees, and insurance expenses. Quicker payments also help improve cash flow and allow your business to operate in a more efficient manner.
Another major benefit of invoice factoring is the ability to allow your business to grow. Whether you are looking to expand your fleet, take on additional loads, hire more drivers, or invest in additional marketing and promotional work, your trucking company requires cash. When you have to constantly wait for payment from loads already delivered it can be difficult to save up the capital necessary to expand.
You may also find yourself stuck in a cycle of waiting for payment, then having to use that payment once it comes in to fund future loads. This cycle is preventing you from ever accumulating the capital necessary to grow your business. Utilizing invoice factoring services helps you get the money on hand to achieve your business goals.
Additionally, emergencies can’t wait. Every business experiences some sort of unexpected expense at some point. If you haven’t had the opportunity to save sufficient funds your trucking company may find itself in a bind. Invoice factoring can help you get the money you need when an unexpected cost comes up.
Why You Should Use an Invoice Factoring Company
First, as discussed at length, invoice factoring provides you with immediate cash flow. Additionally, invoice factoring allows you to get immediate funding even if your trucking business has bad or no credit. Invoice factoring is essentially an advance of the money your client already owes you, as opposed to a loan that is not associated with a guaranteed cash flow.
In addition, your eligibility for an invoice factoring plan is not heavily influenced by your company’s credit history (or lack thereof). In fact, it is likely that your client’s credit history may have a greater impact on your eligibility for an invoice factoring plan than your own credit report.
Invoice factoring also saves your company time and stress associated with collections. Once you have engaged in an invoice factoring plan it is as if you assign the associated invoice to the invoice factoring company. Thus, the invoice factoring company then handles the general accounting responsibilities associated with that invoice, such as collections and accounts receivable. These are major responsibilities (and potential headaches) that you no longer have to worry about, freeing up your time to focus on other tasks.
Invoice factoring companies also provide you with a great deal of flexibility. Invoice factoring plans are generally done on an invoice-by-invoice basis, therefore, there are no long-term contracts involved. You can decide how many invoices you would like to submit to the invoice factoring company. You decide whether to use invoice factoring as a one-time solution for a quick payout or you may plan to use invoice factoring regularly to simply speed up the payment process.
Another benefit of invoice factoring is that it provides lower associated costs than traditional financing. Asset-based loans or lines of credit have an associated timeline of when you need to pay back the money associated with the loan. These forms of financing also come with interest rates that require you to pay an increased premium the longer it takes to repay the loan. In contrast, with invoice factoring, there is one fee associated with the plan which is paid upfront.
Invoice factoring companies often provide additional benefits to their clients, such as fuel card programs. These fuel cards allow you to load money onto the card to pay for fuel and often provide savings options at designated fueling stations. The invoice factoring company may also provide the option to receive a fuel advance once an invoice has been booked. These programs make it easier for trucking companies to track fuel costs and provide money-saving opportunities.
As you can see invoice factoring provides many benefits beyond simply paying a freight bill faster than the typical client. The next time your trucking company is in need of cash or requires a quicker payment consider an invoice factoring service.
Fill out our contact form, or call us at 855.465.4655 if you’d like to have a conversation about how our freight factoring can be beneficial to your trucking business. We look forward to hearing from you and helping you succeed.