How Does Freight Bill Factoring Help Businesses Thrive?
When it comes to owning a trucking or freight company, it can be hard to get the necessary liquid funds you need in order to make sure that your company not only runs smoothly at all times, but also to grow, keep up with – and ultimately get the edge over – your competition.
Because trucking and freight companies depend on their clients’ dedication to paying their invoices on time, if one client is running late on paying a large invoice, you could find yourself – and your company – desperate for cash and unable to make important payments that could seriously impact the productivity and success of your business overall.
That is where freight bill factoring – otherwise known as truck factoring – comes in. Freight bill factoring is known as one of the best financing options for businesses that need to get cash immediately.
If you are wondering how it works and how it helps trucking businesses thrive, then you have absolutely come to the right place! Let’s get started.
What is truck factoring?
Overall, truck factoring is a form of financing that provides a way for trucking companies to receive money for the unpaid invoices and bills that their clients and customers have yet to fulfill. It is the most common choice and preferred choice for a many number of companies who are looking to receive a steady flow of cash so that they can haul loads and make sure that their business continues to run smoothly and keeps growing.
In fact, truck factoring companies are known to pay up to 95 percent of the unpaid invoices so that they can offer immediate cash in the hands of businesses such as yours.
When it comes to working with and depending on truck factoring companies for that liquid cash, trucking company owners like yourself do not actually have to worry about fulfilling the same kind of requirements that you may need to fulfill in order to take out a business loan. For example, you will not have to have a near perfect credit score in order to get funding from a truck factoring company. The reason why is because truck factoring companies will instead look at the credit scores of your clients – as well as the amount that you are owed with those invoices – in order to decide whether or not they will offer you cash and how much they will be able to offer you in your agreement.
How does it work?
The truth is that each truck factoring company works somewhat differently. With that being said, there are some highly common practices and operations that all truck factoring companies will follow.
The first step of a factoring agreement deals with the truck factoring company setting a credit limit that will be based on the credit of the customers and the unpaid invoices in your customer’s account. This is a fantastic aspect of truck factoring companies because it essentially means that the size of your business will directly coincide with the amount of money that you are offered. Truck factoring agreements can come with funding as little as a few thousand dollars and as much as several million dollars! Because of that, the size of your loans can grow as the size of your company grows.
Once you receive the financing agreement, your company will be responsible for submitting the unpaid freight bills and the haul load to the truck factoring company. After you have submitted those required records and documents, the truck factoring company will then go on to send the invoice to your customers, confirm that the load has indeed been delivered, and make it clear that your customers have to pay and complete those invoices.
Once all of these steps are complete, the truck factoring company will offer to pay up to 95 percent of the unpaid freight bill. This will only take about 24 hours so you can be sure to get your cash almost immediately!
From there, the truck factoring company will wait 30 to 60 days for the customers to pay their share of the bill. If they do not pay that bill, the bill will be sent to collections.
Important terms to know
To know if you are making the right decision with a factoring company, you have to learn the basic terminology of factoring.
Spot factoring: This term means that you, the business owner, have the freedom to choose which invoice you want to factor, and your contract will keep that freedom protected.
Reserve: This indicates the percentage of the total invoice amount.
Advanced rate: The money you receive immediately by the truck factoring company based on the percentage of the total invoice amount.
Customer: The customer who is required to pay the factoring company for the freight invoice.
How freight bill factoring companies help trucking companies thrive:
There are so many ways in which freight bill factoring companies help trucking companies not only survive but thrive. If you are still not super familiar with the many ways in which they can – and do – help, then let’s break down all of the most impactful and important ways together.
They are highly flexible
While many factoring companies encourage their clients to sign year-long contract agreements, they are typically quite flexible when it comes to offering a trucking company the kind of agreement that they need to get through a difficult patch or a timeframe in which they need more funding to hire more employees, make additions to their fleet, or make other improvements to their company. Finding a truck factoring company that can offer you the kind of agreement you need for the timeframe that you need it for will be quite doable under the vast majority of circumstances.
As mentioned, truck factoring companies are dedicated to making sure that their clients get the funding they need exactly when they need it. The vast majority of trucking companies are able to offer the funding in full within 24 hours of when the factoring agreement is signed.
Not only can trucking companies expect to get the funding that they need to continue to run smoothly even if there are many invoices that have yet to be paid, but those trucking companies can also expect to receive tons of benefits and incentives from the freight bill factoring companies themselves. Some of those benefits include 24/7 access to your online account, free credit checks on your customers, using professionals to collect payments from your customers, fuel card programs, and insurance assistance.
Another great way that truck factoring companies can help trucking companies is through the assistance that they offer. Make sure to work with a trucking company that clearly makes it a priority to keep in contact with its clients. The reason why this is so important is because you want to have the assurance that if you run into an issue with your agreement, you will be able to quickly reach out to a professional.
When you are searching for a truck factoring company for your business to work with, make sure that they are incredibly easy to reach and always return your calls, texts and emails should you have any questions.
How to be sure that my business will qualify
Now that you have a solid idea of why truck factoring companies are so helpful to trucking and freight companies, you are probably curious about how you will know whether or not your company will actually qualify. As previously mentioned, freight bill factoring companies are much easier to gain approval for than more traditional business loans. The reason for that is because the transactions and financing agreements are based on the creditworthiness of your clients rather than the credit history of your own company.
For that reason, if you have some financial issues in your past, they will not keep you from getting the financing that you need now.
Furthermore, because it is only important to work with clients who already have good credit, you can be sure that their credit will be good enough for truck factoring companies to offer you approval. On top that that, you sure also make sure that your company has:
Unencumbered A/R, meaning that your business is completely lien free
No legal or tax issues
Years of experience within the industry
If your company is able to check all three of these boxes, then you can be sure that you will quickly and easily be able to gain approval with a truck factoring company.
So, now you understand the basic and positive aspects of freight bill factoring. By now, you probably have a much better idea of whether or not this financing option is right for you. If you believe that it is, it is time for you to start looking for some of the top factoring companies in the industry so that you can take advantage of the many wonderful business financing options available to you!
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