In today’s topsy-turvy economy, many trucking company owners are looking to factoring as a means to procure reliable, convenient funding. Factoring is a method of financing that has been used for centuries across many industries and involves selling unpaid invoices at a discount for upfront cash to stimulate cash flow. Rather than waiting for slow paying customers to pay invoices which can sometimes take months, owners of trucking companies can partner with a third-party factoring company to take over the invoice and provide a cash advance to the carrier worth up to 97% of the original invoice value. Financing of this type is particularly useful for courier and trucking services where customers often take upwards of 90 days to pay outstanding bills.
Maintaining Positive Cash Flow
Whether you need to cover utilities, keep your fleet in working order, ensure that your employees are getting paid, or invest in new business and growth opportunities, you need cash on hand to make sure these things happen in good time. When you work with a Factor, you decide how many invoices you factor, financing an entire fleet for a daily rate if necessary. This type of relationship awards you the peace of mind you need to keep your fleet on the road.
In freight factoring, the advance is the cash paid to you upfront by the freight factoring company when you factor your invoice.
Typically, advances are made within 24 to 48 hours, but the right freight factoring company can even get you same day funding exactly when you need it. These firms can even deposit your advance within hours of submitting the invoice. They advance you the funds until the invoice can be collected, which is a service the factoring company provides. This is never 100% of the invoice amount but is typically between 80 to 95% — the remainder of which is held in reserve until the invoice is collected.
In factoring terms, the reserve is the percentage of the invoice value that is held back when you receive your advance. It can range from 3% to upwards of 15 to 20%. When the invoice is finally paid, the reserve is remitted to the carrier.
The Factoring Fee
Of course, factoring companies don’t give advances for free. They charge a small factoring fee, and this fee can vary widely depending on the company and the plan. The fee is collected when the advance is awarded.
To give you a better idea of how various plans look, let’s take a company like AccutracCapital as an example. Here are some of their most popular plans:
Flat Fee Factoring
• Starting from 1.59% for up to 90 Days
• A very simple, easy to manage option with an easy to calculate one-time cost
Factoring Line of Credit
• Designed for larger fleets and operations
• From 0.022% per day
• A flexible line of credit providing maximum value & control for larger trucking fleets
• From 0.49% for up to 10 days
• The ideal funding option for carriers with quick paying customers
• Some of the industry’s lowest rates
As you can see from these plans, there are factoring options available for trucking companies of all types. Freight factoring can mean the difference between getting back to business and running out of funds before the end of the month. Freight factoring solves cash flow problems and might be the solution your company has been looking for.