Trucking company owners know that cash is the most important aspect of the business and prompt paying clients are critical to the company's success and condition. But, what can you do if you get a good client that insists on paying their invoice on freight in 30 days or more? How do you pay fuel, drivers and repairs while you wait to get paid by these customers?
Well, in the past, the only option you had was to take the client and grit your teeth. However, now there is an option that has been gaining popularity with the freight trucking community. Freight bill factoring eliminates the payment wait and gets your freight bills paid in just a couple of days. However, transportation factoring is very different than a business loan. It works by selling your freight bills to a freight factoring company, who pays you for them and then waits to get paid by your customer or broker.
Transportation factoring can be easy to use and works as follows: you deliver the load and issue a transportation bill, you immediately sell the bill to the factoring company, who pays you a first installment of somewhere around 90% to 97% of the freight bill and you get immediate money while the factoring company waits. Once the factoring company gets paid, any remaining reserves (lest a small fee as commission) are returned to you as your second installment.
Freight factoring rates can vary, but they typically go from 1.5% to 3% per 30 days depending on load volume, duration of transactions and customer selection criteria. A factoring line can be established in a little as 3 days, but only with the condition that you can provide all your company documentation in order.