Loads Available Today: 5

Freight Factoring

For trucking companies, especially new startups, having customers pay in a timely manner is absolutely vital to the company’s survival. The biggest dilemma these companies face is the issue of what they do if their customers take 30 days or more to pay them.

This is critical for trucking companies because the customers that take a long time to pay them for their services. This can create a cash flow crunch for the trucking companies, especially when customers take as much as 45 days to pay the trucking companies. The majority of trucking companies are small and cannot afford to have a significant amount of their cash tied up in accounts receivable. One solution for companies is to eliminate any of their customers who pay their bills too slowly. However for smaller companies, this could lead to the demise of their business. The best solution of for trucking companies is to use a finance company (freight factoring company).

There is an emerging alternative for trucking companies known as freight factoring. Freight factoring creates the opportunity for trucking companies to get rid of unpaid bills within days instead of months. The way freight factoring works is instead of giving the trucking company a loan, the trucking company actually sells its freight bills to a finance company (freight factoring company) that works in the freight factoring. In turn, the finance company (freight factoring company) pays the trucking company for the bills and then they assume the accounts receivable liability for the bills. This means the finance company (freight factoring company) is then responsible for waiting for the trucking companies customers to pay them for their bills.

The freight factoring process is not complicated and delivers tremendous value to trucking companies in the form of freed cash flow and budget pressure relief:

Step 1: Fulfill a shipping request and send your customer a bill for the shipment
Step 2: After connecting with a freight factoring company, the trucking company can sell the bill to the finance company (freight factoring company)
Step 3: The finance company (freight factoring company) pays the trucking company for the bills

It is not difficult for trucking companies to qualify for freight factoring, and the practice is becoming more and more common. The primary prerequisite for qualifying for freight factoring is simply for the trucking company to be conducting business with companies who have good payment history (even though its slow).

The cost of freight factoring differs from company to company. The range is generally from 1.5% to 3% for every 30 days. These values themselves vary depending on the amount of the transactions, the length of time of the transactions and the type of customers.

Next - Auto Shipping

Back to Home