Factoring Financing For Small Freight Carriers

Although managing any size freight carrier is always challenging, managing a small freight carrier (four trucks or fewer) is particularly difficult. Most small freight carriers don’t have substantial cash reserves and often find themselves with cash flow problems when a customer delays a payment or two.

These carriers often operate on the jagged edge of a financial cliff, where only a simple push can send them over.

Are you managing your cash flow?

Most owners are very capable when it comes to managing their trucks, their drivers, or their loads. They sometimes fall short, however, when it comes to managing their financial resources.

When things get tight, they may start juggling payments between drivers, fuel, and repairs. This strategy may work for a while, but eventually it fails. And along with it go the chances of your freight company succeeding.

Dealing with slow invoice payments

The most common reason that small freight carriers experience financial problems is that their customers pay invoices in 30 days, rather than offering quick pays. The carrier must be able to cover their business expenses while waiting for payment, meaning that they must have a cash reserve that can sustain the business for that period of time.

However, as mentioned earlier, few small carriers have adequate reserves to handle this problem.

One solution is to ask your customers for quick pays – if they offer them. This strategy may work for a while and could temporarily get you out of financial problems. However, quick pays are not always reliable and can slow when cash flow becomes tight for your shippers.

A better solution – truck factoring

For many freight carriers, a better solution is to finance their invoices using factoring. The solution is surprisingly simple. A finance company mediates the transaction between your customer (shipper) and your company.

You get an immediate financial advance that can be used to pay for important business expenses. Furthermore, factoring can often provide fuel advances to qualifying small carriers.

As you can see, this solution offers many of the benefits of quick pays but does not require your customers to pay sooner.

A simple transaction

Most factoring transactions for small trucking companies are done as a single advance, which often covers 95% to 97% of your gross receivable. The funds can be deposited to your bank account or fuel card as soon as the load has been delivered to and accepted by your client. The transaction concludes once your shippers pays its invoice in full.

Ideal for small carriers

One reason that factoring freight bills works well for small trucking companies is that it’s easy to qualify for it. Since you are financing your invoices, they must be payable by creditworthy shippers. Having good shippers is the most important requirement to qualify for this service.

Also, your company must have proper insurances, a valid fmcsa authority, and be free of major legal and tax issues.

Solve problems quickly

Factoring trucking invoices works very well for small companies that are growing quickly. The size of your financing line is determined mainly by the credit quality of your customers and the size of your invoices, thereby allowing the credit line to increase as your company’s sales grow. Most of these increases can be done automatically without having to reprocess the file.

Because of these features, freight factoring holds an advantage over other solutions. For small freight carriers that are growing but can’t qualify for a business loan or conventional business financing, freight factoring just might be the perfect solution.

Get a quote

We are a leading factoring company and can offer competitive rates and high advances. Get an online quote or call us at (877) 300 3258 to speak with an expert.