A Trucking Factoring service is a business which purchases a trucking company’s invoices for cash on the front-end. Once the factoring business receives payment for the invoices, the remaining amount is held as a reserve for the trucking company. Fees often range from 1.0 to 2.5% for the invoices first 30-days and frequently increases nominally every 10-days after that.
A trucking factoring service knows their clients have a lot of upfront costs. Most make the set-up process quick and easy. The factoring company reviews the trucking company, ensure its customers are reputable, and make arrangments to get the invoices.
When the factoring services take over, the trucking company is often able to receive an advance in under 24-hours.
Factoring is Not a Loan
When you deliver an invoice to your clients, they typical have 30-days to pay. Factoring companies provide the bulk of the cash up front — often within 24-hours. The payments are collected from the customers and once the invoice is paid in full, you get the balance — minus a small fee.
Factoring is a service level agreement, the same as other SLAs which a company has in place. The difference is, factoring pays you.
How To Choose The Best Company
Not all factoring companies are created equal. Not all provide the same level of service needed. Each will claim they have the easiest rate structure: no long-term agreements, same-day financing, no up-front fees, and so on. Quality factoring companies go the extra mile, so search for a company which provides services other factoring companies forget.
What Makes A Great Factoring Company?
Quality firms have been in business for a while. They typically don’t have shareholders and have a demonstrable track record for sustaining financial health. They have survived many national economic downturns and know the minefields. They can walk you through any difficult times. Unlike some factoring companies, a quality agency will not go out of business when times are tough.
Part of a Network
Every factoring business has a preference for three things: size, risk, and industry. While impossible for you to know which business fits your needs best, interviewing each potential factoring company can help you find the best match.
A quality factoring company will have an established network of industry colleagues. With enough variety and skills, the factoring company you choose can be a “one-stop shop” to ensure you find what you are looking for.
Many factoring businesses permit you to pick and choose customers to factor. However, they often have a minimum amount before they agree to work with you. With a quality company, you are allowed the freedom to select which invoices to factor. Lower-tier factoring service companies often have an all-or-nothing requirement.
Often, factoring companies fail to be upfront about their charges. Quality factoring companies are transparent and provide a no obligation rate proposal customized for your business.
Look for a privately held service which isn’t required to satisfy investors. Find one which will invest the time to learn the story of your business and put together a solution customized for you. Don’t work with a company that relies on an algorithm to determine your company’s value.
Factoring can be the ideal methodology for businesses who want a way to manage their cash flow.
Trucking businesses which use factoring are able to pay their drivers weekly even while accounting for other expenses like fuel, insurance, and tags. With a factoring service in place, the company rests assured consistent cash flow happens and there are enough funds to cover payables so the company stays in business. With a better idea of the amount of money coming in, the business owners are not at the mercy of clients and their ability or timeliness to pay.
Factoring company – known as invoice factoring, accounts receivable factoring, or a factoring service, these companies focus on giving cash for invoices. Construction, trucking, and temp staffing agencies are the largest industries using a factoring company.