Factoring companies help trucking companies with cash flow and freight bill collections. A trucking company sells their invoices or freight bills to the truck factoring company and the factoring company advances them cash immediately, often within 24 hours.
Rates and terms for trucking factoring vary based on the size and volume of the trucking company, as well as the freight factoring company. Larger trucking companies that deliver monthly volumes of $500 thousand or more can get rates as low as 1.5 to 2.0% per month. An independent owner operator that generates $20 to $30 thousand revenue per month can expect to pay rates as high as 3 to 5% . Rates also vary based on the freight factoring company. Factoring rates are generally market driven, but some truck factoring companies charge more than others.
Advance rates are higher for freight factoring than other invoice factoring services, such as staffing or construction. Many trucking factoring companies offer advance rates of 95% or more, with some offering “full advance” or 100% advance rates. Full advances are for the entire amount of the freight bill, less factoring fees.
Many trucking factoring companies offer both recourse and non-recourse factoring services. Recourse is the most common and it allows the factoring company recourse to the trucking company for any non-payment issues from the debtor or customer. If a customer doesn’t pay the full amount of the freight bill, then the factoring company will recover payment from the trucking company.
Non-recourse factoring is an option that some factoring companies offer that makes them solely liable for all payments from the debtors or customers. The factoring company will not attempt to recover the non-payment or loss from the trucking company. Non-recourse factoring only applies to non-payment issues that result from debtor credit issues, not quality issues, rate disputes or any other collection issues. Non-recourse factoring is normally more expensive than recourse factoring.
Qualifying for trucking factoring services is simple and quick. The trucking company completes an application that will provide company information, as well as customer information. The trucking factoring company has an underwriting process that verifies personal credit and background checks and analyzes customer credit.
Most approvals are primarily based on the customer credit profiles, since the factoring company will collect payment from them. Trucking companies with poor to bad credit can often manage to get approved based on their customers’ credit which makes trucking factoring very attractive finance option. Call Lisa at (800) 442-2740. Lisa is the President of Sales and Marketing for Mazon Associates.