The trucking industry is currently experiencing a massive shortage of truck drivers. Despite unemployment rates remaining high throughout the country, factors such as restrictive rules regarding drivers, long hours, and inconsistent wages are serving as roadblocks to more workers joining the trucking industry. This lack of drivers is inhibiting trucking companies’ business, leading to reduced load capacity, missed delivery deadlines, and overall unhappy customers. However, trucking invoice factoring may be able to help companies with these struggles.

What is Trucking Invoice Factoring?

Trucking invoice factoring allows companies to receive payment immediately from unpaid invoices. Essentially, a trucking company will submit an invoice from a load they delivered to a third party and that third party will pay the company the amount of the invoice within a day or two, for a small fee. The third-party will then collect payment on the invoice from the customer, instead of the trucking company.

There are two types of trucking invoice factoring services – recourse and non-recourse factoring. The difference between the two involves the risk retained by the trucking company.

Recourse factoring provides that the trucking company remains ultimately responsible if the customer does not pay the invoice. Fees for recourse factoring arrangements are often lower than in non-recourse factoring arrangements, to compensate for the risk retained by the company.

Additionally, invoice factoring companies will often provide credit check services on the trucking company’s client so that the company can properly evaluate the likelihood of the client defaulting on the invoice. This helps the company to make a fully informed decision before taking on the additional risk of a recourse factoring arrangement.

Non-recourse factoring arrangements protect the trucking company in the event their client does not pay the amount of the invoice to the factoring company and the factoring company takes on the risk. Thus, in the event of a default by the client the trucking company is not financially responsible. Fees on non-recourse factoring arrangements are generally higher than those on recourse factoring agreements.

How Does Trucking Invoice Factoring Work?

First, the trucking company will deliver the load contracted for as normal. Then, the company will submit a copy of the invoice, or bill of lading, to the factoring company. Depending on the factoring company utilized this may be through email, facsimile, or a web-based portal maintained by the factoring company. The factoring company will then verify the invoice and then pay the trucking company, oftentimes that same day.

In a recourse factoring agreement, the trucking company will receive the agreed advance once the invoice is verified. Then the factoring company will pay the trucking company the remaining amount of the invoice, minus fees, once the client pays the factoring company.

Why Trucking Invoice Factoring?

Participating in invoice factoring arrangements can have several benefits for trucking companies. For example, invoice factoring provides companies with needed funding quickly. Waiting for clients to pay invoices once a load is delivered may take thirty to ninety days and obtaining long-term loans or other forms of traditional financing can be hard to get at times.

In contrast, invoice factoring delivers much-needed funds to trucking companies, oftentimes within twenty-four hours, and is much easier than more traditional forms of financing. While loans require credit checks of the trucking company, invoice factoring weighs the client’s credit as opposed to the trucking company’s because it is the client liable for the money due.

Additionally, while traditional loans involve the paying of interest, which can add up over time, invoice factoring only requires a small one-time fee to utilize invoice factoring services. And in the same vein, invoice factoring does not involve the repayment of debt like traditional methods of financing, because invoice factoring operates to provide trucking companies with the money they are otherwise owed.

Another benefit of invoice factoring is fuel advances. Some invoice factoring companies offer fuel advance programs as part of their invoice factoring. This involves an advance of the cost of fuel for the delivery of a load before the load is actually delivered.

In addition to advances in the cost of fuel, many invoice factoring companies also have programs to help their clients save on the cost of fuel. These savings come in the form of fuel discount cards, which can be utilized at tens of thousands of truck stops nationwide and can save trucking companies thousands on the cost of fuel.

Having a predictable cash flow also makes it easier for trucking companies to grow their business. Having a steady cash flow allows truck companies to consider expanding their current routes, which will increase the profits made from current routes, and allow truck companies to expand the reach and profitability of the company.

Having a working relationship with an invoice factoring company can also help trucking companies save on their insurance. All truck companies need insurance to protect their fleet while on the road. Many invoice factoring companies help their trucking clients save on these costs by providing pre-negotiated discounts from the nation’s top insurers.

How Exactly Trucking Invoice Factoring Can Help with Trucker Shortages

The financial benefits of invoice factoring discussed above can help trucking companies address the shortage of truck drivers. To start, the increase in cash flow and faster payment of invoices can help companies increase their payroll to be able to recruit new drivers. Additionally, truck companies can focus on retaining their current drivers by increasing compensation packages and benefits, as well as being able to allow drivers to have more time at home with family once new drivers have been recruited and trucking fleets are fully staffed.

Trucking companies will also be able to provide additional benefits to their drivers, such as reloadable fuel to cover gas expenses. Finally, these companies can make investments in technology to manage their workforce and increase the efficiency and happiness of their workforce.

In summary, the trucking industry is currently facing many challenges including a shortage of truckers. Advanced Commercial Capital can help trucking companies address the shortage of truckers by adding predictability to trucking companies’ cash flow. This increased cash flow can then be utilized to hire new truckers, incentivize current truckers to stay in the industry, and increase efficiency amongst the workforce. Contact us today!