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How Factoring Strengthens a Trucking Company

By 02.27.20November 29th, 2021No Comments
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Invoice factoring puts trucking companies at an advantage over the competition and lets them run a stronger business. How, you ask? Let’s break it down.

When you factor invoices, you never have to worry about when you’re going to get paid. That makes it a good fit for trucking companies that generally have to deal with long payment times and high overhead expenses. Not to mention factoring clients get benefits that aren’t available to anyone else.

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Ideal for growing businesses

Factoring is perfect for new businesses or fleets who want to stay ahead of expenses and target growth. The Statistic Brain Research Institute revealed that 55% of transportation business startups were no longer operating after 4 years. And a lack of cash flow is a big reason for those failures.

Forget trying to get a loan to survive. Traditional lending institutions can require up to a 30% down payment and virtually all make you assign your truck as collateral. That’s how banks reduce the risk of you not paying.

It’s easy to see why getting a loan isn’t an option for most truckers just starting out. On the flip side, factoring doesn’t require any upfront costs and it’s easy to get approved. Much more appealing and attainable.

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No time to waste

Even if you tried to secure a bank loan, traditional financial institutions likely won’t lend to truckers because they know trucking is a risky business. Unlike a bank, freight factoring doesn’t require collateral, equity or even a perfect credit score to get approved.

And who has time to wait for the long process that comes with a traditional lending institution? Banks can take weeks or even months to approve a loan. And there are so many hoops to jump through and mountains of paperwork to gather and submit.

Setting up factoring for your trucking company will likely take as little as a few days. Once that’s in place, getting invoices paid going forward is fast – usually within 24 hours.

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Factoring is fast and easy

Factoring companies offer a quick and easy application and approval process. They aren’t worried about your less-than-perfect credit score or taking your truck as collateral.

You provide information about your customers and your factor checks their creditworthiness. That’s how factoring companies assess their risk of your clients not paying.

For example, suppose your business is growing fast. With long wait times for load payments, you find yourself unable to take advantage of new opportunities. You don’t have access to the needed funds and you can’t take on a loan to get the new runs because the approval process takes too long. Your cash shortage is costing you new business and loss of revenue.

Instead, you apply to a factoring company and are quickly approved. Fast approval means you get cash for your unpaid invoices right away so you’re able to take on new work. You have a consistent cash flow to grow your business. This means no more missed opportunities.

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Keep cash flowing

Long wait times for payment can kill your trucking business. You run short on cash before your invoices get paid. Factoring gets you your cash now, when you need it most. Deliver your load, submit your paperwork and get paid within hours instead of weeks.

Use the constant and consistent cash flow to haul more and better-paying loads. No more watching the mailbox for checks to come in. And no more waiting for your money.

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Lower your financial risk

Limit your exposure to financial risk and ruin with factoring. Your factoring company checks the creditworthiness of your customers so you always know who you can trust to pay.

Good factoring companies let you use a client portal to quickly check the credit status on existing and potential new customers. Using your smartphone you see instantly if any load is likely to go unpaid, before you start driving. You’re unlikely to have a risk of nonpayment when you know your customer’s credit is solid. You’ll avoid the risk of hauling for deadbeats.

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Save on the cost of fuel

Most reputable factoring companies have fuel card programs with savings directly at the pump. Say you drive 2,000 miles a week for 50 weeks of the year, that’s 100,000 miles annually. Your truck averages 6.5 miles per gallon of fuel and uses 15,385 gallons for the year. If your fuel card saves you an average of 20 cents per gallon, that’s a savings of over $3,000 per truck per year. If you have 5 trucks, that’s a total savings of over $15,000 per year. These are huge savings!

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Free up time and money

You didn’t get into this business because you enjoy paperwork. Eliminate billing and collections from your job description. A good factoring company will take these chores off your hands. You’re free to concentrate on driving and managing your business.

Think of the time you could save if you have someone else handling your back office or the money you’ll get to hold onto because you won’t have to outsource this service. Instead of handling it all yourself, the factor pays you for your invoice and collects payment from your customer. And you know the billing and collections will be done right the first time. Factoring frees up time and saves you and your business money. Simple as that.

There are so many ways factoring gives trucking businesses an edge: you save money on fuel, save time on billing and collections, and you get paid faster. Your cash flow is consistent so when growth opportunities arise, you can pull the trigger. You’ll have the means to get back on the road quicker, make needed repairs and fuel up. With the steady cash flow provided by factoring you can haul more loads and choose better loads.

If factoring sounds like it’s right for you, align yourself with a trusted partner like eCapital. We’ve been working in the transportation industry for more than 25 years, making us trusted experts in the field. By partnering with eCapital, you can keep your business going strong instead of waiting around to get paid and you’ll get:

  • A robust fuel discount program with credit terms to save thousands at the pump.
  • An exclusive broker network where all high-paying loads are factorable.
  • The best-in-class (free) online portal and mobile app to help you run your business anywhere, anytime.
  • All of your billing and collections are handled so you can focus on hauling your next load.
  • A dedicated account rep who’s familiar with your needs. You’re more than just a number.
  • And so much more!

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