Freight Factoring Can Help You Grow Your Trucking Enterprise
The trucking industry in America is facing a shortage of drivers, resulting in some retailers opting to delay nonessential shipments. Many are also paying high prices to ensure their goods get delivered on time.
A report from the American Trucking Association states that more than 70 percent of goods consumed in the U.S. are moved by freight — however, in order to meet this demand, the industry needs to hire almost 900,000 new drivers. This is something many trucking companies do not have the financial resources to do. The matter is made worse by the fact that customers can take up to three months to pay their invoices back.
How are freight companies supposed to invest without prompt returns for their services?
Truck Driver Shortages
The ATA report notes that the industry has struggled with a driver shortage for at least 15 years, but in every economy, transportation is a vital sector that enhances production, so it won’t be slowing to a halt anytime soon. But waiting for late payments from clients means that trucking companies do not always have the cash they require on hand to pay their bills or meet day-to-day operational needs — such as keeping the drivers they do have, let alone hiring more.
What Is Freight Factoring?
Thankfully, trucking companies can now turn to freight factoring, allowing them to solve their cash flow problems faster. Factoring allows companies to get paid faster and stop waiting by helping them turn their accounts receivable into upfront cash — providing much-needed financial reassurance.
When factoring invoices through a third-party entity such as Accutrac Capital, trucking companies deliver their packages as they normally would, but then have the factor take over existing invoices and chase down the customers, for a nominal fee. The trucking companies are then paid up to 97% of the outstanding invoice, usually on the same day. The factoring company collects a small factoring fee, and then the outstanding amount is returned once the customer pays in full. This gives trucking companies the ability to focus on growing their enterprises and not on collecting outstanding invoices.
Factoring is Basically Accounts Payable Outsourcing
The various benefits of working with a professional and reliable factoring company include same day funding, affordable factoring rates starting at 1.57% for flat factoring, 0.49% for flex factoring covering ten days, and a factoring line-of-credit option starting at 0.022% which is ideal for financing larger fleets.
Unlike most traditional financing programs, the factoring company uses the invoices themselves as collateral to advance funds. If customers have solid credit ratings, the trucking company is likely to be approved.
Invoice factoring gives freight companies financial breathing room, so they may devise stronger business strategies and do their part to make the transportation industry as a whole more reliable and efficient. It enables them to keep their cash flow above board and their drivers behind the wheel, but also to hire much-needed staff without waiting for their customers’ invoices to clear in order to give them the go-ahead.
