In an ideal world, truck factoring wouldn’t be necessary. Trucking companies, such as yourself, would get orders, deliver loads, invoice clients and within a short amount of time receive payment. After the business owner has received a payment, he or she will pay their expenses such as truck maintenance, driver payments, fuel and suppliers.
Unfortunately, this isn’t the reality that many small to medium sized trucking businesses experience in North America. Some clients take a long time to pay their invoices – these processes and procedures have been set in stone for decades and there’s no way they can fast-track your payment, so you’re left waiting more than a month for your payment to arrive. To make matters worse, you’ve got drivers, staff and suppliers who also need to be paid for you to keep your doors open (and your trucks on the road).
This is where trucking factoring can come in very handy. In this case, you would simply follow these steps:
1. A customer books a load and sends through all the details regarding the load, delivery date and rates.
2. You make the necessary arrangements and deliver the load.
3. You send the invoice to the factoring company instead of the client.
4. The truck factoring company pays a percentage of the invoice and handles the invoicing with the client from there.
5. Once the client has paid in full, the rest of the amount (minus the factoring service fee) is paid to you.
As you can see, this simple and straightforward process allows you to get your invoices paid almost immediately and it ensures you don’t have to worry about all the administration involved in following up with clients. It also means you don’t have to wait for weeks and months on end in order to receive your money.
Truck factoring isn’t necessarily ideal for each and every trucking business, but if you need to ensure your company always has a positive cash flow, then it is something you should consider. The factoring service fee usually varies from company to company and it can be anything from 1.5% to 6% of the invoice. While this could add up to a hefty sum of money, you also have to consider the time you will save due to the fact you’re no longer on the phone, following up with clients about unpaid invoices (or standing in the queue at the bank in order to ask a loan so you can make payroll and drivers payments).