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How to Qualify for Freight Factoring

Last Modified : Jun 20, 2024

Fact-checked by: Bruce Sayer

Trucking is one of the more volatile industries and extremely difficult to maintain financial stability. No matter whether the industry is in a boom period or a bust, having the financial backing to keep trucks moving is always a pressing need. If you own a trucking company, there are many issues that continuously occupies your mind. Ensuring readily available access to working capital is one of the most common of these concerns.

The use of invoice factoring in trucking has become a common financing strategy to accelerate cash flow and achieve reliable access to working capital. Specialty lenders, experienced in transportation financing have refined factoring in trucking with freight factoring, a tailored cash flow solution to meet the rigorous demands of a volatile industry.

Freight factoring is a mainstream financial strategy commonly used by trucking companies in all stages of development. The two main features that continues to increase factoring in trucking as a preferred funding option is fast, reliable access to working capital and easy qualification.

How easy is it to qualify for factoring in trucking?

If you own a trucking company and serve creditworthy customers, qualifying for freight factoring is beyond easy – it’s fast and simple. This is because the credit decision to fund your company is not based on the financial history and current standing of your company but rather, it is based on the credit strength of your customers. No matter if you have a startup company with just one truck or an established fleet needing to restructure financing, freight factoring is designed to meet the capital requirements your business needs.

Factoring in trucking is the practice of selling freight bills (invoices) at a discount in exchange for immediate cash. If you deliver freight and issue invoices to customers that have good credit standing, then your trucking company is constantly generating valuable assets (invoices) that can be leveraged for fast cash. To convert invoices to cash, partner with a reputable lender with extensive experience providing factoring in trucking. These are the lenders that provide freight factoring, the premium choice for factoring in trucking.  These are the lenders that know how your business works and are familiar with industry debtors (your customers). With extensive databases and advance technology, these factoring specialists are able to receive, review, approve the application, and process first funding within a few days.

 

How to apply for factoring in trucking

How to apply for factoring in trucking?

Qualification for factoring in trucking is much, much simpler, and faster than applying for a traditional bank loan. To ensure the most expedient funding process be sure to engage an invoice factoring company that specializes in factoring in trucking.

Some factoring companies serve multiple markets, spreading their resources across vast customer needs and varying industry requirements. These factoring companies are less familiar with the unique issues of factoring in trucking and require lots of paperwork and lots of time to complete due diligence.

Lenders that specialize in factoring in trucking create an enhanced client experience by maximizing convenience with easy to manage services. This includes simple qualification requirements with minimal supporting documentation needed to complete the process. For fast funding look for a factoring company that requires minimal credentials in the application process and has the infrastructure to process credit searches, UCC filings and legal documents quickly and easily.

The best lenders providing factoring in trucking will have a simple online form to get started and be able to process an application and approve funding in just two days once the client provides:

  • Copy of Articles of Incorporation
  • Two pieces of ID including driver’s license
  • Carrier Package

Steps to First Funding

As soon as a client is qualified, funding can begin. The following is a step-by-step guide to first funding:

  1. Notifying the trucking company’s customers of the factoring arrangement. Once a client starts factoring, they will need to notify their customers of the invoice assignment and that all payments need to go to the factoring company. Most trucking customers are familiar with factoring in trucking and probably deal with other carriers and brokers who also use factoring to expedite payment. These customers may even appreciate interfacing with the efficient work practices and systems of professional freight factoring companies to improve accounts receivable management.
  2. Invoicing and documentation submission. Once the freight has been delivered, invoice the customer and send a copy of the invoice, rate confirmation and bill of lading to the factoring company.
  3. Invoice verification. Before the factoring company can provide funding on a submitted invoice, they need to verify that the load has been delivered. The best lenders that provide factoring in trucking access extensive networks using advanced technology to expedite the process and can complete verification in minutes.
  4. Receive funding on approved invoices. Once the factoring company approves an invoice, the funds will be advanced to the client’s bank account. The advance rates associated with factoring in trucking are typically high, usually ranging up to 95% of the value of the invoice. Industry leading freight factoring companies can transfer advanced funds (minus a small fee) directly into the trucking company’s account within minutes of verification. The remaining percentage is held as a reserve until the customer pays the invoice full amount to the factoring company.
  5. Final remittance. Once the invoice is paid by the customer, the factoring company will release the reserve amount and deposit it directly into the trucking company’s account.
  6. Deliver load, invoice customer, repeat. This process (steps 2-5) repeats with each invoice that is submitted to the factoring company ensuring steady, reliable funding. The more invoices you generate, the more funding becomes available. Factoring in trucking is the ideal funding solution to support operations and fuel growth.

What is Non-Recourse Factoring?

Another option to consider when shopping for the ideal solution for factoring in trucking is non-recourse factoring. Unlike traditional factoring, in non-recourse factoring, the factoring company assumes the risk of non-payment due to debtor bankruptcy. This method allows businesses to obtain immediate liquidity without the liability of potential non-payment by their customers. Not all companies that offer non-recourse factoring cover the same liabilities. You can find some things to look out for in our blog Top 8 Things to Understand Before Signing A Non-Recourse Factoring Agreement.

Why choose freight factoring instead of bank financing?

The simple answer is that banks are no longer interested in lending funds to trucking companies. In fact, banks have little interest in lending funds to any small or medium-sized business in any industry. This credit crunch is part of a larger trend as the commercial banking system continues to withdraw from what they consider to be low profit, high-risk lending to small and mid-level enterprises.

As the banks move away from small business lending, specialty lending options (such as factoring in trucking) are filling the gap. For trucking companies in need of working capital, a simple comparison of bank loans vs freight factoring reveals the advantages of this alternative lending solution. Lenders that specialize in factoring in trucking understand the challenges and barriers that hinder trucking operations and limit company growth. To meet these challenges, freight factoring companies utilize advance technologies and delve into vast databases to manage the flow of information. It is this heightened ability to access, monitor and analyze financial data rapidly that provides freight factoring companies the means to efficiently manage the complexities of the trucking industry. This competitive advantage explains the rise in popularity for factoring in trucking as banks continue to reject credit applications from transportation companies.

Easy qualification and fast funding provide the ability for trucking companies to turn financial stress into positive cash flow. For companies facing operational interruption due to financial constraints, factoring in trucking is the key to unlock and leverage the money they have already earned. It is the fastest and easiest way to secure reliable funding for busy owner-operators, fleet managers, and freight brokers.

For more information on how to qualify for freight factoring visit eCapital.com

Refer a Friend to eCapital Freight Factoring and get cash if they become a new client.

Key Takeaways

  • Trucking is one of the more volatile industries. If you own a trucking company, ensuring readily available access to working capital to support operations is one of the most common issues and reason for concern.
  • Freight factoring is a specialized form of invoice factoring in trucking.
  • If you own a trucking company and serve creditworthy customers, qualifying for freight factoring is fast and simple.
  • For transportation companies facing operational interruption due to financial constraints, factoring in trucking is the key to secure reliable funding to maintain operations and grow the business.

 

ABOUT eCapital

Since 2006, eCapital has been on a mission to change the way small to medium sized businesses access the funding they need to reach their goals. We know that to survive and thrive, businesses need financial flexibility to quickly respond to challenges and take advantage of opportunities, all in real time. Companies today need innovation guided by experience to unlock the potential of their assets to give better, faster access to the capital they require.

We’ve answered the call and have built a team of over 600 experts in asset evaluation, batch processing, customer support and fintech solutions. Together, we have created a funding model that features rapid approvals and processing, 24/7 access to funds and the freedom to use the money wherever and whenever it’s needed. This is the future of business funding, and it’s available today, at eCapital.

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eCapital Corp. is committed to supporting small and middle-market companies in the United States, Canada, and the UK by accelerating their access to capital through financial solutions like invoice factoring, factoring lines of credit, asset-based lending and equipment refinancing. Headquartered in Miami, Florida, eCapital is an innovative leader in providing flexible, customized cash flow to businesses. For more information about eCapital, visit eCapital.com.

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