Freight Bill Factoring: Exclusive Ways To Manage Cash Flow

Trucking is a constantly increasing and lucrative business. That’s why it is also highly competitive, especially if you are starting a trucking company.

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To stay in front of your competitors you have to keep improving in all segments, including: fuel efficiency, organizing your team, getting new solutions on time (like ELD’s), meeting the compliances and much more.

Financing your trucking business is a big part of that process, and arguably the most critical one. Traditionally, when it comes to external financing, bank loans was the solution.

But, what if your company doesn’t have a background for their requirements? Can you really afford a time to wait for their approvals? Do you always have to increase your debt to get funds?

Getting bank loans seems to be far from ideal option, doesn’t it?

Fortunately, there is a way, and a damn good one, for making a cash flow problems flourished. It’s called freight bill factoring.

But, let’s take a look before we leap.

What Is Freight Factoring?

Put it simply, freight factoring is the easiest way to get immediate money for your freight bills. Without freight factoring you will wait for weeks or even months to get paid. You need it to avoid cash flow struggling.

Allow me to show you, just how quickly can you get yourself into the cash flow problem:

Say you found the first loads, did your part and now you are waiting to collect the money for it. During that time some costs, like repairs, showed up and now you need to cover them.

Naturally you expected that, but you were planning to pay for it with the cash from the deliveries. Doesn’t look like thing to be worry about – you’ll just wait for a few more days to get your money, and then you will have your vehicle repaired.

But (why it always has to be but?), you receive a call from a customer, who is willing to pay crazy money for a quick one-shot delivery. Unfortunately, you can’t do it, for your vehicle isn’t ready because you failed to collect the money from the previous job.

One good deal is about to slip through your hand.

What went wrong?

When you are dealing with the slow-paying customers and brokers, and let’s be honest most of them are like that, you can easily get into cash-flow problems. Just like in the scenario above.

This is happening very often to small companies that are starting the trucking business. To avoid missing a good opportunities, you need to have your money on time.

How Freight Factoring Works?

It’s a simple process of speeding up a cash flow, that includes third party – a freight factoring company, usually called a factor.

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Hey! I'm George J.Magoci and I will send you a FREE eBook where you can learn 12 secret steps how to make $950 more truck/month.

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After you delivered the freight load, you send the bill to the customer. Then you submit the freight bill copy to the factoring company. Finally the factor send you advance.

Factoring company do it for a fee. The initial advance is a slightly (from 5 to10 %) smaller amount from the one your customer would pay. Initial advances variates between different factoring companies, but they range from 90 to 95%:

List of Freight Factoring Companies

More than 700 freight factoring companies are out there. So, how can you decide? It won’t hurt to get some recommendations:

Business News Daily recommend these companies to consider:

  • 1st PMF Bancorp (invoicefactoringus.com)
  • American Receivable. (americanreceivable.com)
  • BlueVine (bluevine.com)
  • Capital Plus (capitalplus.com)
  • Charter Capital (chartercapitalusa.com)
  • CIT Commercial Services (cit.com)
  • Crestmark (crestmark.com)
  • Factor Funding Co. (factorfunding.com)
  • Interstate Capital (interstatecapital.com)
  • New Century Financial (newcenturyfinancial.com)
  • Paragon Financial Group (paragonfinancial.net)
  • Riviera Finance (rivierafinance.com)
  • RMP Capital Corp. (rmpcapital.com)
  • RTS Financial.(rtsfinancial.com)
  • Universal Funding Corp.(universalfunding.com)
  • USA Factoring (usafactoring.com)

One big list of financing companies is provided by CBAC.

Another one from Factoring Explorer is here.

How To Choose a Right Freight Factoring Company?

According to Commercial Capital LLC when choosing the best factor for your business, you should consider these questions to narrow your list of potential factors:

Q: How long have they been in business?
A: The factor should be in business for a 5 year at least

Q: Are they specialized for transportation industry?
A: Don’t regret your time to check out if the factor is specialist for your niche.

Q: Is fuel card offered?
A: This is the filter questions – only consider factors with fuel card integration

Q: Do they provide unlimited credit reports?
A: This is one of the main arguments for choosing a freight factoring as a solution, meaning that you don’t want to miss it by picking a poor factor.

Other recommended questions are:

  • How quickly can they set up an account?
  • How quickly can they fund your first freight bill?
  • How quickly do they approve new shippers/brokers?
  • Can they finance copies or do they need originals?
  • Do they provide fuel advances?
  • How long are their contract terms?
  • Do they specialize in transportation and logistics?

After all the questioning, some additional options should be considered. Between various conveniences offered by the factors, I’ve picked three that seemed especially interesting to me:

  • Fuel advance factoring. This is a typical situation where you can see the advantage of freight factoring for the new trucking companies. To get the fuel advance, a factor usually verify booking and picking the load via confirmation sheet and bill of lading, respectively. After that, they load the funds onto your fuel card or send the money to your bank account.
  • Short-term contracts. The good thing about the freight factoring is option for, offered by most of the freight factoring companies.
  • Online credit information. Don’t miss this service offered by the most of factoring companies. They should provide the info about all your current and potential clients.

Put Your Invoice On The Auction

Save your time and energy by using service from one of the bidding platforms for selecting a company. They are putting clients invoices to the auction where factoring companies are bidding to get picked.

Take a look how it works in CBAC:

CBAC Platform

Benefits of Freight Bill Factoring

Using factors services provides you the access to the funds. It’s a much more convenient alternative comparing to applying for a loan all the time.

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