Waiting to get paid for work you have already done is a pain, but waiting for money when you have bills to pay is a huge problem. Trucking companies in particular often face cash flow problems when invoices from loads go unpaid for long periods. The work is done, but the cash is often tied up in accounts receivable. For a large trucking company with consistent cash flow, this might not be a problem—but for small and medium sized companies, sometimes waiting to be paid is not an option.
Freight factoring is one alternative financing option for trucking companies that get rejected for a bank loan. Approval for factoring is based on the credit worthiness of the freight customers, not the company’s credit, and therefore is much more likely than with a bank. Factoring is also a flexible option that allows for same-day cash. Here are the steps to take when deciding to factor freight:
Do research: Only choose factors with knowledge of the industry. Not everybody has someone on the staff who has worked with the industry before, so be picky.
Don’t hurry: Plan in advance so you don’t feel obligated to factor invoices urgently. Doing so could result in getting caught in a contract that you don’t want, or making costly mistakes. Take your time and find the best fit for your individual needs. Some companies offer back-office billing services or one-time invoice factoring agreements. Figure out what is best for you.
Start the process: Contact the company and you will get placed with an account manager. They can help you navigate the process and start getting cash right away for your receivables.
For more information on freight factoring, see here.