3 Things You Didn’t Know About Factoring
If you’re in the trucking business you have surely heard the word “factoring” or may
be even “freight factoring.” However, not everyone truly understands the process or even some of the perks that come along with factoring! Factoring can be pretty crucial when just getting started in trucking to increase cash flow and give you more working capital. In this short article, you’ll learn about what factoring is, the process, and 3 things you didn’t know about factoring with CarrierHQ.
What is Factoring
Factoring is an alternative to traditional financing that does not require a traditional credit check.
Freight factoring occurs when a carrier sells its accounts receivable (invoices) to an invoice factoring company at a discounted rate. In short, a factoring company purchases your invoice and pays you for work you completed, less a small fee, and collects payment back directly from your customers.
Sometimes it can take as long as 30, 60, or even 90 days for a load to be paid out by a broker. Currently, the industry standard is 40 days for truckers to be fully paid for their load. This can cause cash flow issues and reduce truck drivers’ working capital. Factoring allows truck drivers to be paid out, typically within 24 hours/same day and increases their cash flow and capital.
Recourse Vs. Non-Recourse
Before you dive straight into the world of factoring applications, consider the different types of factoring.
Recourse Factoring: Recourse factoring typically means less risk for the factoring company. Usually, these rates are lower than non-recourse options. The factoring company still purchases the invoices from the customer but if the invoice becomes uncollectible, they may “charge back” the trucking company.
Non-Recourse Factoring: This means that typically the factoring company will take on the risk if the customer does not pay them in a timely manner or at all. Most companies will not bill you if the customer cannot pay as long as is it not from a claim, dispute, or short pay.
What is the factoring process?
Once approved and upon delivery of your freight from a credit-approved shipper or broker, you can sell your receivable to a factor who will pay you the invoice rate at a slight discount and manage the collection process for you.
The truck driver makes a delivery and has the customer sign the invoice (This is very important. Make sure you always get your invoices signed).
The truck driver will then send the signed invoice and proof of delivery to their factoring company.
The factoring company will then send over the funds either same day or as soon as the next day.
After the invoice is received, processed, and paid out to the driver, the factoring company takes over the billing process and will collect directly from the customer.
3 Things You Didn’t Know About Non-Recourse Factoring With CarrierHQ
By factoring, you receive cash quickly and avoid the hassle of following up on collection calls.
🚚 Get a guaranteed $2500 credit with access to fuel, tires, and maintenance
⛽ You’ll receive competitive fuel discounts: 20¢/gal off pump price
💰 Flexible funding
Free next-day ACH
$12 same-day wire
3-hour or 60-minute funding option available
Bonus info on why you should factor with CarrierHQ:
Low factoring rate with high advance rates
Online/mobile-friendly invoice submission and broker credit checks
How to Get Started with Factoring
Focus on taking more freight and growing your business, while we handle your collections.
What you’ll need:
Business name, email, monthly volume, and truck volume! If you want to learn more, head over to our factoring page.
Head over to our factoring application to apply today, or reach out to us.