FACTORING FOR OWNER OPERATORS AND FLEETS

Freight factoring, truck factoring or logistics factoring is a specialized form of invoice factoring designed for the transportation industry. It is a mainstream financial strategy that involves factoring transportation receivables by the selling of account receivable invoices at a discounted rate in exchange for immediate cash.

Here’s how freight factoring typically works:

1. Service Delivery: The trucking company delivers goods or services to its clients or customers.
2. Invoice Generation: The trucking company generates an invoice for the delivered goods or services, specifying the payment terms and due date.
3. Factoring Agreement: The trucking company enters into an agreement with a freight factoring company (that’s us!). The factoring company verifies the creditworthiness of the trucking company’s clients.
4. Invoice Submission: The trucking company submits the unpaid invoice to the factoring company for financing.
5. Cash Advance: The factoring company advances a significant portion (usually around 80-90%, but at eCapital we provide up to 100%) of the invoice value to the trucking company, typically within 24 to 48 hours. The funds are transferred directly into your eCapital account.
6. Collection: The factoring company takes over the responsibility of collecting payment from the trucking company’s clients.
7. Remaining Balance: Once the factoring company receives the full payment from the trucking company’s client, they deduct their fees (factoring fee) and return the remaining balance to the trucking company.

Freight factoring provides immediate cash flow to trucking companies, allowing them to cover operational expenses, such as fuel costs, driver wages, equipment maintenance, and other business needs, without having to wait for the clients’ payment. It helps trucking businesses improve their cash flow and maintain smooth operations by converting their unpaid invoices into working capital.

Companies experiencing high growth, financial difficulty or are starting up qualify for freight factoring. Other examples of companies who qualify include:

• Freight brokers
• Intermodal and container freight companies
• Long-haul transportation carriers

Freight factoring is different than a commercial line of credit because:

• Qualification is based on your customer’s credit score: One of the main differences between factoring transportation receivables and applying for a business loan is how the financial institution determines your creditworthiness. When you apply for a business loan, your bank will base their decision on how creditworthy you and your business are. When qualifying for factoring, the decision is based on how creditworthy your customers are. That is especially helpful for a business that is already stretched its available credit, or to a newer business that has yet to build its credit history.
• What is considered acceptable collateral: For a business loan, you will often be asked by the bank to put up collateral such as a building, piece of equipment, or personal assets like your home. With freight factoring, the invoice sent to your client (ie: your accounts receivable) becomes your collateral, no other hard assets are required.
• How and when it is repaid: Most business financing requires regularly scheduled payments stretched over a specified period of time (for example: monthly). With freight factoring or freight bill factoring, you receive an advance up to 98% of the invoice amount within 24 hours of submitting your invoice to the transportation factoring company. Our logistics factoring fees are deducted from the advance making the cost of factoring simple, easy to manage and affordable.

Freight Factoring provides owner operators with trucking startup companies immediate access to capital. With this, you avoid the 30 to 90 day payment period common in the trucking industry. If you do business with creditworthy customers then you qualify for freight factoring.

• Easier to obtain than a bank loan
• Get cash immediately after documentation approval
• Avoid using business or personal assets as collateral
• Avoid risk by checking customers credit rating
• Avoid chasing receivables
• Expert advice from trucking industry experts who know your business
• No monthly payment obligations
• No need to re-negotiate payment terms every time you need additionally funding

Getting to know your business is a priority. As a logistics factoring company we want to make sure we offer you the best options possible that match the growing needs of your business. We’ll want to talk to you within 24 hours of you contacting us and we’ll need to see a certain amount of paperwork before we make a decision. If we have the paperwork we need from you, we can make a decision in a couple of days of you getting in touch. That’s why our clients like working with us. We don’t hang around, and you are not required to sign long term contracts.

Costs are dependent on the services you use and the amount of invoices we collect payment for on your behalf. Contact us today for a free, no-obligation quote.

What is recourse factoring?
Recourse factoring is a factoring agreement in which a trucking company sells its invoice receivables to a factoring company with the understanding that if the invoice remains unpaid after the recourse period for any reason (usually 60 to 90 days), the trucking company will be obligated to buy the invoice back.

Recourse factoring is the most popular type of factoring. It is more flexible and costs less than non-recourse factoring.

What is non-recourse factoring?
Non-recourse factoring is a factoring agreement in which a trucking company sells its invoice receivables to a factor with the understanding that if the debtor (your company’s customer) does not pay the invoice by the end of the recourse period, the factoring company may be obligated to absorb the loss. However, in non-recourse factoring, it is important to note that no universal definition specifies the liability’s circumstances. (More on this in the next section).

In effect, non-recourse factoring is like recourse factoring with an added layer of bad debt protection. For this reason, it may be more appealing to trucking companies who deal with higher-risk shippers and shippers who have been known to exceed their agreed-upon payment dates.

A factoring company, also known as a trucking factoring company or transportation factoring company, is a specialized financial institution that provides freight factoring services to businesses in the transportation industry, particularly trucking companies and freight carriers. These companies offer a range of financial services tailored to the specific needs of transportation businesses.