Trucking Factoring - Freight Factoring

Updated October 28th, 2022

trucking factoring

Cash Flow Detour

Mitchell Trucking has been a family run business since 1989 that specialized as a subcontractor for the U.S. Postal Service. "We had steady route work with the Postal Service for years when we got out bid on a portion of our routes. We could not believe it and had a feeling that the new contractor would be operating on razor thin margins."

Bill Mitchell refused to terminate any of his employees when he lost the USPS contract. "I thought we would quickly pick up new LTL business to fill the gap." After 9 months of attempting to grow the business back, Mitchell Trucking burned through its retained earnings and had negative equity. "We were contacted by the USPS to pick up the routes we had lost when the new contractor simply went out of business. I had a new problem; I did not have sufficient cash to support the payroll and fuel needs of the contract." Bill's accountant recommended Gateway Commercial Finance to help bridge the cash flow shortfall. "Within days of our initial introduction, our trucks were back on the road to profitability!"

Keeping the Cash Flow Wheels Turning

Looking for a Trucking Factoring Company?

Trucking can be a lucrative industry. But every freight business suffers occasional slow periods. Unpredictable economic or weather conditions can derail even the best trucking companies, large or small—making it difficult to keep pace with operating expenses.

With customers taking 30-60 (sometimes even 90!) days to pay invoices, many trucking business owners lack the cash in hand to maintain vehicles, replenish supplies and make payroll.

Does this sound familiar?

Luckily, Gateway Commercial Finance’s trucking factoring can buy your freight invoices and provide quick cash advances while you’re waiting for your customers to pay. This freight factoring process allows you to manage your freight company without having your hands tied by low cash flow.

Choosing the right truck factoring company can determine how much truckers can benefit financially—and how quickly they can get capital to support their businesses.

What is a Trucking Factoring company?

Trucking factoring goes by several names. But whether a company offers trucking factoring, freight factoring, load factoring, transportation factoring, or freight bill factoring—all of these refer to the same financial instrument.

A factoring company provides trucking businesses with working capital during a crunch. When money is tight and you have business costs, a load factoring company gets you funding so your company doesn’t suffer.

Think of it as short-term relief for long-term company health—you don’t want to let periods of low cash flow hurt your business in the long run. That’s where factors step in and give you a little boost when necessary.

An invoice factoring company, otherwise known as a factor, is a third-party financial intermediary with the means to advance cash to your business without a lengthy application process. While a bank provides loans in exchange for interest payments, a factoring company can provide funds in exchange for your receivables and a small fee.

Essentially, a truck factoring company turns your invoices into cash, allowing you to get paid faster for transactions that you’ve already made!

How Freight Factoring Companies Work

Trucking factoring companies are available to help you solve your cash flow problems. Once you reach out to a factoring company—via phone, online, email, etc.—a manager will guide you through the factoring process from start to finish. However, here’s a simple truck factoring step-by-step overview:

  1. Your trucking company delivers the load and issues an invoice due in 30-90 days.
  2. Your business starts an account with a trucking factoring company.
  3. At a slightly discounted rate, the factor purchases your freight invoices, providing you funds (advance rates are typically 80-97%) to keep your trucking company running.
  4. Your customer pays the invoice, which is deposited in a temporary reserve account.
  5. The factoring company collects the payment, takes the agreed-upon discount of the total freight invoice value (around 1-2%), and returns the rest to your business.

You can learn more about how invoice factoring works and read answers to frequent factoring questions here.

Remember, you decide when you need the cash and how many invoices you’d like to sell. Perhaps you just need a temporary working capital injection to be able to deliver a load—or you’re looking for a consistent cash flow solution. In any case, you have options to avoid the delay involved with outstanding account receivables.

Why You Should Use Trucking Factoring?

The main reason to use factoring for trucking is simple. You need cash on hand to support and grow your business. But there are some other reasons to consider:

Avoid waiting too long to get paid.

Getting and maintaining customers is worth celebrating. But the simple truth is that many of your clients take too long to pay. You need the proceeds now—not 30-90 days later. Factoring for trucking companies ensures that you see cash right away, not on some far-off due date.

Be prepared.

While all freight companies occasionally experience low periods of incoming cash, not all businesses have to suffer financial problems when that time comes. By designating a specific amount of invoices to be factored, you can rest assured that you’ll have enough funds to keep your business running and your drivers paid—no matter what unfavorable conditions arise! Once you develop a relationship with a factoring company and experience the benefits of freight factoring, you’ll likely feel comfortable factoring more of your invoices—whenever it’s necessary.

Prevent the risk of nonpayment.

Unfortunately, trucking businesses can run the risk of nonpayment by customers. Because of this, most trucking factors offer two types of freight factoring services: Recourse or Non-recourse.

  • With Recourse factoring, your business is liable if a customer doesn’t pay. However, in order to prevent this, truck factoring companies can get in touch with nonpaying customers to collect payments. This can relieve your business of chasing down your customers.
  • With Non-recourse factoring, the factor increases the discount fee but assumes the risk in the event of nonpayment.

Check out this article for more information about non-recourse and recourse factoring.

Get funds without the hassle.

While banks require truckers to have a high credit score and a long business history, freight factoring companies have fewer requirements and an easier, faster application process. While some documents are still required, factors mainly need to know that you have creditworthy customers that have received the loads and your freight invoices.

Get a factoring quote within seconds, send us a message, or call our managing director at 1-855-424-2955 to get you set up within 24 hours.

About our Trucking Factoring Program

At Gateway Commercial Finance, we offer:

  • Recourse and Non-recourse freight factoring
  • Advances as high as 98.5%
  • Factoring rates as low as 1.65% Flat
  • Fuel cards & fuel advances
  • Load Board Access
  • Free Credit Checks (within 10 minutes)
  • Same Day Funding via ACH
  • Freight factoring for owner-operators, carriers, shippers, and brokers
  • Financing for trucking industry start-ups, small businesses, and also established companies

Request a factoring quote today!

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