If you own an American trucking or transportation company, you know that working capital and strong cash flow are the keys to staying in the black. Without ample cash on hand to meet your daily operational needs, you will struggle to keep your margins.
This is simply a fact of running a trucking business. But the good news is that there are options out there for trucking company owners to help them find financial stability in both smooth and choppy economic waters.
One of the most popular financing options that more and more trucking company owners are implementing is known as freight factoring. Factoring involves selling your unpaid invoices at a discount. If you have any experience in the trucking industry you know that this can be a boon considering some companies take up to three months to pay on their invoices.
Factoring allows you to take a resource that is not currently helping you (in the form of an unpaid invoice) and sell it at a discount for the upfront cash you need now. Working with a freight factoring company gives owners access to immediate working capital, and also helps them meet the rising demands of fuel costs as well as equipment and fleet maintenance costs.
Thanks to many secondary benefits, factoring helps lessen overhead costs and improve efficiencies by including professional AR management and unlimited free credit checks on current and prospective customers, thereby helping you mitigate future risk.
Here’s a breakdown of how the process works:
- Your company completes a haul
- You send a copy of the invoice to the factoring company, along with delivery documentation
- The factoring company sends you a cash advance of up to 97% (minus a small fee) which is transferred directly into an account of your choosing within 24 hours — or even within the same day. The remaining 3% of the invoice value is held in reserve
- When your customer pays the invoice, the factor collects the funds, and then reimburses you the remaining 3% balance
Since transportation factoring is not a loan, the qualification process is much easier and much faster than applying for a conventional loan or line of credit through a bank or other lending institution. If your customers are creditworthy and have a good payment record, you’ll most likely be qualified.
There are many flexible plans offered by factoring companies. To give you just one example, Accutrac Capital offers several options depending on the size and scope of your business. Flat fee factoring (the most common option) is simple and easy to manage, from 1.59% for up to 90 days with a simple one-time cost.
Larger fleets or operations might consider a factoring line of credit starting at 0.022% per day, while companies who deal with faster-paying customers might consider flex factoring, starting from only 0.49% per day for up to 10 days.
When you work with a factoring partner that understands the trucking and transportation industry, the process becomes even simpler. Accutrac works exclusively with trucking companies and understands the ins and outs of the American trucking business.
If you own a trucking company, and you’re interested in monetizing your accounts receivable and acquiring working capital the day you need it, consider transportation factoring today.