Did you recently start a transportation company? Are you hoping to take your existing company to the next level? Strong cash flow is critical to long-term business success in the trucking industry – and a plethora of other industries. Experienced truckers often strongly recommend a factoring partnership for startup companies looking to succeed in business. In essence, freight factoring is a huge deal in the transportation stratosphere. Why? When should a company owner utilize freight factoring? In the content below, we explore factoring, the best time as a transportation company to look into a partnership, as well as a variety of benefits associated with the service.

What is Freight Factoring?

In short, factoring is a financial service whereby a financial institution – or factor – purchases accounts receivable from a business, typically at a discounted rate. This rate is called a factoring fee. When a transportation company sells the accounts receivable, they immediately receive cash. The factor is then legally entitled to receive payment for the invoice. Thus, factoring provides new transportation companies the ability to receive consistent cash flow to maintain trucks, employees, and day-to-day operating expenses.

Why Not Just Choose Traditional Bank Financing?

Trucking companies may wonder why factoring proves more beneficial than traditional bank financing. Primarily, qualifying for factoring services is based upon the creditworthiness of a trucking company’s customers – not the company itself. Companies with a history of integrity and honesty are often chosen for a factoring partnership; however, the weight of decision largely rests on the trustworthiness of a company’s clients. Additionally, speed is another consideration. Trucking companies can often begin a factoring partnership within a few days, while bank loan approval takes time.

Recourse Factoring

Recourse factoring differs from non-recourse in a single, significant way. While involved in a recourse factoring partnership, your trucking company is ultimately responsible for the invoice if the client does not pay in full. To minimize the risk involved, freight factoring companies often provide credit checks to guide in proper, informed decisions before accepting a load.

Non-Recourse Factoring

Non-recourse factoring protects the trucking company from falling into debt, should a client fail to pay the invoice. If this happens, the trucking company is not legally responsible to pay the bill. Instead, the factor takes the risk of the freight bill not being paid. As one may assume, non-recourse factoring fees are typically a little higher than recourse factoring. However, this option is often best for a young transportation company that cannot properly handle the risk of a client who doesn’t pay.

When Should I Utilize Freight Factoring for Trucking?

As mentioned, savvy trucking professionals with years of experience often recommend freight factoring as soon as possible. You should utilize freight factoring as a new company, looking to succeed in the long run, or an existing company in need of consistent cash flow to grow and develop. Immediate, reliable cash flow is important for a startup transportation company. Processing payments takes time, emergencies arise, and clients sometimes fail to pay in full when required.

Furthermore, as a new business, you may not possess a robust, positive line of credit – often the only way to receive access to funding as a company. Freight factoring companies understand that startup companies are frequently without an established line of credit. Startup companies often do not have the time or expertise to properly handle invoicing and collections without stress. Freight factoring companies deal with the general accounting responsibilities associated with invoicing and collections, allowing you to manage other daily tasks with peace of mind.

Finally, fluctuation happens in business, and freight factoring partnerships provide the flexibility startups require. Most factors require long-term contracts, but Advanced Commercial Capital does not lock you into a long-term contract. Instead, the service is provided as you need cash flow to fund your business.

What are the Benefits of Freight Factoring?

1. Factoring Is Debt-Free

Debt is an unavoidable necessity and often associated with starting a business. However, in the transportation industry, this is not always the case. Funding your trucking business with freight factoring allows for debt-free business startup, because factoring is not equivalent to requesting a loan.

2. Factoring Is Beneficial for a Growing Business

When demands associated with business growth weigh on your shoulders, factoring provides an incredible opportunity to hire drivers and purchase trucks before receiving payments. As demand increases, factoring allows you to fall in step with business growth and thrive in the industry.

3. Factoring Offers Flexibility

As mentioned previously, freight factoring with Advanced Commercial Capital can be a short-term arrangement, but can also be a long-term financial tool to help you meet your business goals. If you need to factor some but not all of your invoices, that is perfectly acceptable. Factoring is designed to aid trucking companies as needed – and not necessarily be an all or nothing service.

4. Factoring Allows for Invoice Tracking

After a load is delivered, a trucking company may not receive payment for 30-90 days, depending on the specific contract. But through factoring, trucking companies get paid immediately. Additionally, factors generally keep track of invoices and handle collections, so you don’t have to.

Advanced Commercial Capital

At Advanced Commercial Capital, we provide the best service with the most competitive rates in the factoring industry. We always keep our client’s best interest in mind, dedicated to doing everything possible to help our clients succeed. We see ourselves as your financial partner. Below, we’ve listed a few benefits associated with working alongside our company:

• No long-term contracts
• No application fees
• No setup fees
• No termination fees
• No monthly service or maintenance fees
• No liability to you if the debtor doesn’t pay
• None of your money will be held in reserve
• Non-recourse factoring – we take all the risk!
• Payment with legible copies
• Education with a patient, experienced staff

These benefits are only a small sampling of the industry-leading factoring services we offer! To learn more about our company, feel free to give us a call today at 855.465.4655 or reach out via our online contact form. We look forward to helping you discover the right financial solution for your needs.