Factoring Companies Drivev For small trucking companies, freight factoring can be a great way to drive revenue and long-term growth. In an industry that takes 30, 60, or even 90 days for invoices to get paid, factoring services are a big game-changer.
In this post, we will discuss how factoring works and why it can be a good decision for your fleet.
What is a factoring company?
Before we get into the advantages, let’s first answer this question: how does factoring work?
Truck factoring or freight factoring is a service where trucking companies can sell their invoices at a discounted rate. Instead of waiting for months for customers to pay, factors will advance up to 98% of the invoice value and take over the collections process.
This way, trucking businesses will instantly access the funds tied to their pending invoices, which can be used to cover various operational costs.
Once the factoring service has been collected from the customer, they will send the trucking company the outstanding balance minus a small fee.
Unlike loans of traditional lines of credit, factoring doesn’t require excessive paperwork, and approval can be as fast as 24 hours. This means truckers can get their invoices converted into cash within the day, or even just a few hours.
How do factoring companies work for truckers?
A factoring company offers a beneficial partnership to trucking businesses, which can ultimately help them grow. Here are some ways how factors make it possible:
1. Providing instant funds
Instead of queueing up in the bank or waiting for loan approvals that take weeks, truckers can simply sell their invoices to Factoring Companies Drive. This way, they can get their funds without incurring new loans or entering into bad debts.
2. Reducing the risk of non-payment
Factoring companies can also conduct credit checks on customers before truckers accept the haul. This way, they can prevent signing up clients with a bad payment history and avoid losses due to non-payment.
Overall, this risk mitigation also protects trucking companies from financial losses under recourse factoring terms. Under this setup, companies are required to pay back the amount in case their customer fails to pay the factored invoice.
3. Allowing flexibility and scalability
Another great thing about factoring services is it’s highly scalable and flexible.
Trucking companies can choose which invoices they want to invoice and only whenever they need to do so. Aside from that, factoring companies are also equipped with enough capital to keep up with an increasing volume of invoices.
4. Reducing administrative tasks
Once a trucking business sells its invoice to a factoring company, it also transfers the collections process to the service provider. This way, they can focus on accepting more hauls and driving instead of spending time doing follow-ups with clients.
Aside from that, some factoring companies also offer additional services, such as accounting, which gives truckers more convenience.
Frequently Asked Questions
Can you have more than one factoring company?
Technically, it’s possible to work with two or more factoring companies. First of all, most factoring services don’t require long-term contracts, and truckers are free to choose which invoices they want to sell and when.Factoring Companies Drive
However, working with multiple factoring companies can pose problems for your business. It can make the funding process more complex for your business, and there can also be communication challenges along the way.
Is factoring good for a business like trucking?
If you’re getting tired of long payment cycles to the point that you go out-of-pocket for expenses, then factoring would be a great choice.
By partnering with a factoring company, you can turn your invoices into cash instantly. Also, you no longer have to resort to loans or bad debts just to keep your business afloat.
Is factoring worth it?
Although a factoring service costs a fee, it’s worth the small sacrifice if you want fast, convenient, and flexible funding.
The key here is finding a reliable and trusted factoring company that matches your company’s needs. The factoring service should have enough capital to keep up with the amount of invoices your fleet gets.
What companies use factoring?
Factoring isn’t only exclusive to the trucking industry. It’s also a popular service in the healthcare, contracting, merchandise, staffing, and other industries.
These industries often have long payment cycles, and factoring allows them to access funds immediately.
Conclusion
Factoring services can be the missing piece in your business’ growth. With a reliable factoring company, you no longer have to wait for months just to get your hard-earned cash.
Aside from that, factoring removes the task of collections from your trucking business. This is one less task to think about while you hit the road with more hauls and more revenue.
In the long run, a factoring company can be your dependable partner in boosting your trucking business’ profits and growth. It’s a win-win situation that many trucking companies are now enjoying.