5 Benefits of Factoring for Trucking Companies

September 6, 2023

If you are a part of the trucking industry, you know how much time and effort goes into managing and growing the business. While trucking is undoubtedly a rewarding business, it can also be challenging. Trucking companies often deal with delayed payments from clients, long waiting periods, and cash flow issues.

Enter the benefits of freight factoring - an excellent solution for the financial challenges that trucking companies face. Many companies today provide factoring services explicitly designed for the trucking industry. Freight factoring can be an excellent option for trucking companies looking to smooth out their cash flow, improve collections, and expand their business.

What is freight factoring?

Freight factoring is primarily a financial service that enables trucking companies to get paid for their deliveries and invoices the same day or next day when sent to clients. Freight factoring companies purchase the trucking company’s accounts receivables or unpaid invoices and give them cash advances ranging from 80-90% of the total invoice amount. Once the invoices are paid by clients, the freight factor will deduct their fees and remit the rest of the money to the trucking company.

What are the benefits of factoring?

Improved cash flow.

One of the most significant benefits of factoring is the much-improved cash flow for trucking companies. Freight factoring companies pay cash advances on invoices the same day or next day they are issued, thus eliminating the need for long waiting periods for payments from clients. This allows trucking companies to receive immediate payment for their work, which can help them improve overall cash flow, meet their financial obligations, pay salaries, and fund their business activities.

Access to working capital.

Freight factoring provides quick, easy access to working capital. Having reliable access to funds can help trucking companies with unexpected expenses like vehicle maintenance or repairs, purchase new vehicles, or fuel. Freight factoring companies provide funding even when traditional bank loans or lines of credit are unavailable, which can be invaluable for a company looking to grow continuously while maintaining their current slate of clients.

Risk of bad debt.

Another limiting factor to the growth of trucking companies is the risk of bad debt, where clients may refuse to pay invoices due to various reasons. Freight factoring companies assume this risk, and any bad debts incurred from unpaid invoices are on them since they have purchased the invoice. This can free up the trucking company to focus on growing the business rather than chasing down unpaid invoices.

No hidden fees.

Freight factoring companies are transparent with their pricing, unlike other financial institutions, which can have hidden fees. Freight factoring companies often charge a flat fee or a percentage of the total invoice value. In most cases, the percentage charged is around 3%, which is relatively low compared to traditional financing options. This type of transparency is a significant benefit of factoring for the trucking industry.

Professional accounts receivable management.

Freight factoring companies can also act as the trucking company’s accounts receivable management team. The freight factor provider tracks the client payments, handles invoice follow-ups with clients, and covers other administrative tasks associated with the invoices for the trucking company. This service reduces the workload on the trucking company, thus allowing them to focus on other integral business activities.

Start enjoying the many benefits of factoring!

Whether you’re running a small- or medium-size business, you need cash to operate, and the team at BP Financing can help you achieve that goal. We’re a dedicated freight factoring company, and we provide you with rapid cash based on your invoices, so you can always have the capital you need without having to chase down client payments. Learn more about our process online, or you can reach out to our team to get started today.

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