Can I Finance My New Trucking Company with Factoring?

finances

Demand for trucking will continue to rise for the foreseeable future, which is why starting a trucking company can be a lucrative idea. But, as with any business, getting a new trucking company up and running can be very expensive.

You can use independent financing, such as dipping into your own savings or taking out a second mortgage, but understandably, most new company owners can’t or won’t do that. So, the only other option is to get help with financing the business.

Fortunately, trucking company owners don’t have to reinvent the wheel. There’s a process that has helped transportation businesses stay moving with steady cash flow without worrying about crippling interest payments or going into debt: factoring.

Why Factoring Works for New Trucking Companies

Factoring works because it gives you operating capital based, not on collateral or debt, but on your accounts receivable.

For example, normally, you’d issue a bill to your brokers and shippers, and they’d usually pay within 45 to 60 days, depending on terms. While you’re waiting on that payment, you’ll also keeping your trucks on the road, keeping your truckers paid, and keeping the whole system humming along. But if a payment is missed – and they often are – your cash flow can suddenly dry up.

A factoring company avoids that mess. They give you money for your accounts receivable up front, without having to wait 45-60 days. They then get paid by your broker or shipper for the load you’re delivering. You’ll make less in gross payments, but in exchange you’re getting steady cash flow, certainty about getting paid (often in the same day), and less stress over your finances.

Recourse Versus Non-Recourse Factoring: What’s the Difference?

When you talk to a truck factoring company, you’ll have two options: recourse and non-recourse factoring.

With non-recourse factoring, the company benefiting from factoring – your company – bears no liability with any invoices that go uncollected. The burden and risk of collecting payments from your customers is entirely on the factoring company.

With recourse factoring, the company agrees to buy back any invoices that go uncollected. This places more risk with the business, although this option can be more affordable due to lower fees.

Either can be a good solution for a new trucking company. Talk to a factoring company with experience in the business and great customer service to learn more about the process and how it can benefit your new company.

Corporate Billing provides invoice factoring options for a variety of small businesses. Contact us to get a quick quote. Our team has decades of experience helping trucking companies and service providers get paid on time and grow their businesses.