December 10, 2021 | Fork Freight
If you are reading this article, chances are that you have already heard about factoring invoices for trucking companies.
Let us explain how it works. The factoring company will buy your unpaid invoices at a discount, usually between 80% and 95% of the value of the invoice. You then get paid immediately by the factoring company and you no longer have to wait 30, 60 or even 90 days for your customers to pay.
By the time you finish reading this article, we hope you’ll have a better idea of what factoring is and how it works.
1) Trucking factoring is becoming very popular, and there are lots of different companies competing for it.
2) Trucking companies that factor improve their cash flow by obtaining a lump sum payment for the invoices they factor. This leaves them with more money to grow their business.
3) Because many trucking companies have bad credit, factoring is a great way for them to get the cash they need to keep their business running.
4) Factoring rates are typically much lower than traditional bank loans, and there are no pre-payment penalties.
5) Trucking factoring can help a trucking company expand their business by giving them the cash they need to grow.
In the trucking industry, fleet owners have a daily challenge of how to best manage their cash flow. As each day passes, money is being spent on things such as fuel, repairs and hired drivers. In addition, fleet operators also need to invest in new trucks or add trailers so that they can grow their fleets with newer equipment. The simple answer to managing all of these cash flow challenges is factoring. Factoring in the trucking industry allows business owners to receive advances on their invoices. This immediate infusion of cash can help businesses cover the costs mentioned above, as well as other important expenses.
In order for a fleet owner to factor an invoice, they will need to locate a company that offers factoring services. In the trucking industry, there are two primary types of companies that offer these services: non-recourse and full recourse. Full recourse factoring is an arrangement between a business holder and a lender where the operator retains 100% ownership in the debt owed to them, unless they default on their loan or fail to comply with the terms of their loan agreement. Non-recourse factoring is an arrangement between a fleet operator and a factor where the liability for the debt is transferred to the factor, but not retained by them (unless they default on payment).
Non-recourse factoring allows fleet operators more flexibility in their business loans. Since the factor is not taking on the liability of the debt, it is easier for them to approve invoices from businesses. In addition, non-recourse factoring agreements often have lower interest rates and shorter terms than full recourse agreements. Because of this, fleet operators can factor more of their invoices and get the cash they need sooner.
Factoring trucking invoices is a great way to get money when you need it most. The advance payment on the invoice means that cash flow is improved and you can continue to operate your business as usual.
The downside is that you are losing out on the full value of the invoice. However, the factoring company will usually charge a fee for their services, which can be offset by the money you save by not having to wait for your invoices to be paid.
Another downside is that not all factoring companies are created equal. Make sure you do your research and choose a company that will be a good fit for your business.
Overall, invoice factoring is a great way to improve cash flow in the trucking industry. The pros definitely outweigh the cons, and it is a solution that more and more trucking companies are turning to.
In conclusion, factoring is a great way for trucking companies to get paid on their invoices more quickly, improve their cash flow and expand their business. The trucking industry is a vital part of the American economy. By understanding how factoring works in this sector, fleet owners can better manage their cash flow and keep their businesses running smoothly.
If you’re looking for a factoring company that understands the trucking industry, we recommend Triumph Capital. Triumph Capital can help end cash flow gaps and get access to your money faster.
For more information on factoring, visit Fork Freight