Everything You Need to Know About Truck Factoring

When looking for a truck factoring company you need to do research to consider many aspects about each company. It’s important to find a company that understands that truck factoring involves a lot of care and not only about making the wheels move.

Trucks parked in a line

The benefit of using truck factoring companies is that you will always have a flow on cash, regardless of what the economic condition is or the state of your business.

Truck factoring is known as a transportation factoring business that can be considered as a financing option for businesses that require to use trucking companies while receiving cash immediately.

What is truck factoring?

Truck factoring provides a way to receive money for unpaid freight bills. It is the preferred method due to getting paid instantly without waiting weeks for the customers to pay. It is the most common choice for a lot of companies to ensure that they receive a steady flow of cash to haul loads in order to keep their business growing.

In other words, truck factoring companies will pay 95% of the unpaid invoice with immediate cash in your hands and they will put the effort into collecting that amount from your client.

When it comes to working with a truck factoring company, such as ezinvoicefactoring.com, you won’t need to have a great credit score or a business that has been established many years ago for you to be qualified. Truck factoring companies focus on the clients and their credit history, as they will be the responsible party that pays them.

How does truck factoring companies really work?

Each truck factoring company follows simple rules to ensure that everyone is happy. The first step is creating a credit limit that will be based on the credit and the amount of unpaid invoices in your customer’s account.

Semi trucks parked in a line

You will have to be responsible for submitting the unpaid freight bills and the haul load to the truck factoring company. Do not depend on your customer to do so. After you’ve submitted the required documents, the factoring company will send the invoice to that customer, as well as confirming that the load has been delivered.

Once all three steps are completed, the truck factoring company will offer to pay 95% of the unpaid freight bill, which will take about 24 hours to give you the cash. The truck factoring company will then have to wait 30-60 days for the customer to pay their share of the bill or eventually find a way to collect the payment.

What are the benefits of truck factoring companies?

Truck factoring your invoice has many benefits for each party involved. Here are the top reasons that will benefit you and your business:

Instant cash

Truck factoring companies pride on paying you in cash within 24 hours of submitting your invoice. It is very different from applying for a loan, which always has a waiting period.

Cash arranged in columns

Business growth

Every business requires a steady income to increase their business. With the factoring company paying you within 24 hours, you can feel comfortable to hire more drivers, add more trucks, invest in marketing campaigns, and more.

No factoring limits

When submitting unpaid invoices to a factoring company you won’t have to worry about limits. The decision will be focused on the value of each invoice, which gives you the freedom to factor as many receivables as you want.

Better financial management

With a great cash flow coming out of factoring your invoices, you can ensure that your financial responsibilities are paid on time. You will be able to pay your employees on time and pay off all of your bills without any delays.

Debt free

While factoring your invoices and getting involved with a company that will pay you in cash may seem like another loan that you have to worry about, it is actually risk free. Factoring will not cause you to be in any type of debt or impact your credit score. In fact, it will help you to pay off any debt due to your invoices getting paid quickly.

Saves your valuable time

Using a truck factoring company will save your time from being spent on trying to process the invoices and figuring out how to collect the money from customers. Your time is better off spent on developing strategies to grow your business and making more money.

Flexibility

Depending on the factoring company you choose, you will be allowed to pick the invoices you want to factor from your customers.

What are the types of invoice factoring?

Invoice factoring has two types, recourse and non-recourse factoring. If you choose to go with recourse factoring, you will be required to repay the factory the amount of money you received from them for the unpaid invoice if your customer refused to pay them. In other words, you could find yourself in a financial hardship if the factoring company can’t collect the invoice money from the customer.

Paper clips and a calculator

Non-recourse invoice factoring offers credit protection. This means that the factoring company will accept the risk while assuring you that credit is guaranteed on the factored invoices. If your customer happens to not be able to pay for the invoice, you will not be responsible for that and you won’t need to repay the factoring company, as you have an agreement to keep your credit protected.

Both recourse factoring and non-recourse factoring will guarantee to provide you with money, but one could put you at risk with developing bad debt.

How to choose the right truck factoring company for you?

When choosing a factoring company, you have to find one that is the right fit for you and your business, as well as all your needs for transportation. Each truck factoring company has its own services, rates, requirements, programs, and more.

Here are the basic things you should consider when looking for a factoring company:

Quick and easy

The point of working with a factory company is to do things quickly and with a small amount of effort. Don’t waste your time trying to work with a factoring company that requires jumping through hoops to get approved or forcing you to pay a service fee to apply. Factoring companies focus on approving the credit of your customers only.

Recourse and non-recourse factoring

Choose a factoring company that gives you two options to pick, which is recourse and non-recourse program, is important when making a decision on working with them or not. While the non-recourse seems like the most appealing option due to the factoring company being responsible for unpaid invoices, both programs have their own pros and cons. It’s important to note that non-recourse will cost you more money than the recourse program.

How quickly they pay

To make your decision easier when choosing between truck factoring companies, look for one that guarantees to pay you quickly. Most truck factoring companies will pay in cash within 24 hours. The process should be fast and easy.

Care to connect with you

It’s crucial to do business with a truck factoring company that cares to make a connection with their clients. If you happen to run into a problem, you need to be able to reach someone who knows you immediately.

Shaking hands at a business meeting

A sign of a truck factoring company caring about their clients is assigning an account manager to track everything for you and keep you updated, as well as availability to respond to your calls and email instantly. You are paying to receive an excellent service and you should expect the best from them.

Flexibility and freedom

A factoring company should not force specific volume requirements regarding unpaid invoices. It’s important to have flexibility and freedom to choose which invoices you want to factor. Ask the company about the terms and make sure they understand yours.

Added services

The best truck factoring companies will offer additional services for their clients such as 24/7 access to your online account, free credit checks on your customers, using professionals to collect payments from your customers, fuel card programs, and insurance assistance.

Flexible agreement

Factoring companies may encourage you to sign a contract agreement that is a year long, but if you don’t feel comfortable signing with a company for a year you should consider other options. Find a truck factoring company that will allow a month-to-month agreement to have flexibility when you want to choose a different company.

Important factoring terminology to learn

To know if you are making the right decision with a factoring company, you have to learn the basic terminology of factoring.

  • Spot factoring: This term means that you, the business owner, have the freedom to choose which invoice you want to factor and your contract will keep that freedom protected.
  • Reserve: This indicates the percentage of the total invoice amount.
  • Advanced rate: The money you receive immediately by the truck factoring company based on the percentage of the total invoice amount.
  • Customer: The customer who is required to pay the factoring company for the freight invoice.

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