Invoice factoring is an incredible financial service for trucking companies of all sizes. Freight factoring helps owner-operators, small fleets as well as larger carriers to get paid immediately for loads that have been delivered. The trucking company sells its invoices to a factoring company, then gets cash within 24 hours of delivery. Factoring eliminates the collection delay from credit terms with freight brokers, freight forwarders and shippers.
Freight factoring is very common in the transportation industry because truckers have so many variable expenses and costs. Truckers can’t wait weeks or months to collect their revenues because they have fuel bills, repairs and maintenance, insurance payments and many other costs they have to pay every day. Factoring provides the cash to pay for these expenses as they arise and allows them to keep making deliveries without waiting for the last month’s invoices to be paid.
Freight bill factoring
Freight factoring companies not only fund your freight bills, but they also provide valuable invoicing and collection services. Whether you bill your shippers and brokers or the factoring company bills them for you, you can offload the administrative functions of tracking and collecting the invoices.
Once you get funded, the factoring company handles the collections and accounting. They’ll provide you with accounting reports so you can see current and past activity on your customers. Many provide an online portal for easy account access.
Trucking factoring companies normally have relationships with thousands of brokers, shippers, and freight forwarders, so they’re familiar with their payment and collection processes. This is really helpful if you have a paperwork problem or payment issue. They can resolve the problem faster than you and keep you from wasting your time and effort chasing down phone calls and tracking phone conversations.
Trucking companies must send appropriate paperwork to the factoring company in order to get funded. This would include any or all of the following:
- Freight bill
- Bill of lading (BoL) or proof of delivery (POD)
- Rate sheet.
Fortunately, transportation factoring companies make it simple for you to get them the paperwork. You can usually email or fax the papers to them and some factoring companies equip you with a mobile app to make it quick and easy. They know you need to be hauling freight, not spending time handling loads of paperwork.
Recourse and Non-recourse Factoring
Many truck factoring companies offer both recourse and non-recourse factoring plans. Recourse factoring is the most common type of factoring. It allows the factoring company to recover uncollected invoices from the trucking company that provided the services.
Non-recourse is an alternative plan that protects the trucking company from being liable for any collection issues that result from debtor or customer credit issues. Non-recourse makes the factoring company liable for those collection losses.
Finding a Factoring Company