Truck Factoring 101

truck factoring

The trucking industry is the backbone of America’s economy—it employs nearly 7 million Americans and moves trillions of dollars worth of goods each year. Without it, commerce itself would grind to a screeching halt.

The most important part of the trucking industry is keeping your drivers on the road—this can be difficult without the cash flow necessary for fuel, emergency repairs, and day-to-day expenses. Cash flow can be a big cause for concern. Transportation companies often struggle with waiting for payment, while having to cover recurring expenses like payroll and gas.

Truck Factoring is a great solution for growing your business despite these common cash flow challenges.

What is Truck Factoring?

Transportation factoring refers to the sale of accounts receivable for a discounted price. Essentially, a trucking company sells their unpaid invoices to a factoring company and receives up to 97% of the amount owed, in cash, within a few days. The remaining cash is returned—minus a small fee—once the invoices are paid off.

Transportation factoring is a fairly simple process, and approval is really likely as long as your company’s clients have good credit.

Factoring Services

We all know that sometimes, customers don’t pay their invoices. This can affect the way a trucking company chooses to factor their accounts receivable—there are two main options.

Recourse Factoring is when the transportation company takes on the liability for their customers who default on their payments. The benefit of this option is that regular rates are lower than they would be without any liability. This is a great option for larger trucking companies with the resources to cover bad debt expenses if they come up.

Non-Recourse Factoring means that the factor is liable for all bad debts, with respect to invoices. This also means, however, higher overall rates in order to offset the liability cost. This is usually the best option for smaller companies that can’t afford a bad debt out of pocket.

The Benefits of Factoring

Factoring comes with many benefits that will help your company overcome any and all cash flow challenges you’re facing!

For starters, you get immediate cash—in less than 24 hours—so there’s no stressing about a lack of cash on hand. With factoring, you eliminate overhead, as well as the costs associated with processing invoices. Factoring also provides unlimited capital, as it’s the only source of financing that grows with your company’s sales. Bad credit is usually not an issue, as only your customers’ credit history is taken into account.

Truck factoring is a great solution for companies facing very common cash flow problems. For more information, contact Corporate Billing today!