We asked our freight factoring customers what some of the trucking company expenses they think are the most significant. The majority of the answers were fuel, repairs and tires.
As you know, there are many other trucking company expenses, but the four listed above were the most common ones our customers think about. Luckily, with financing solutions like freight factoring, our customers can get the cash they need to pay their company expenses.
Freight factoring is a common financial transaction where a trucking company sells its accounts receivables to a third party (factoring company) at a discount.
Your trucking company will choose a factoring company and sign a contract. The company will do research on your customers to give you a maximum amount of the invoices you can factor.
Your clients will get a notice of assignment from your factoring company letting them know where to send future payments.
Instead of sending your invoices to your customer, send them directly to your factoring company. The factoring company will advance you a percentage of the invoice, usually around 90%.
Once the factoring company collects the funds on the invoice from your customer, it will pay you the remaining balance, minus a small factoring fee.
One of the greatest benefits of freight factoring is that you will get paid on your invoices in 24 hours or less. Some factoring companies, including TCI Business Capital, have added financial services such as accounts receivable management, credit analysis, risk assessment, fuel cards and treasury.
Since you are no longer waiting 30 to 90 days for customer payment, you are able to pay your trucking company expenses on time. Companies using factoring can schedule and make payments with confidence because they have reliable cash flow in the bank.
If you use TCI Business Capital as your factoring company, we have a fuel card program that is accepted at over 10,000 truck stops, fuel stops and travel centers nationwide. They money we pay you on your invoices can go right into your fuel cards if you choose.
Recourse factoring is the most common form of factoring in the accounts receivable finance industry. Recourse factoring means that if an invoice isn’t paid within a certain amount of days, usually 90 or more, the freight factoring company retains the right to sell back the invoice to the company.
On the other hand, non-recourse factoring is when the freight factoring company assumes all of the credit risks for the collection of an invoice. No matter how long the debtor takes to pay, the freight factoring company will wait on the payment.
If your business can answer yes to one or more of the following questions, freight factoring could be the solution for you.
Unlike bank loans, most freight factoring companies will look at the credit and risk of your customers, not you. TCI Business Capital will make sure that all of your customers have good credit and are able and likely to pay their invoices. If you choose factoring with TCI, we will also look at any new customers you bring on to make sure you will get paid for the work you do.
There are many variables to look at when choosing the best factoring company such as advance rate, freight factoring fees and additional services it might provide. Make sure the freight factoring company you choose has the flexibility and support your trucking company needs.
If freight factoring sounds like it might be the right fit for your trucking company or if you have questions, contact a financial expert at TCI Business Capital or call (800) 707-4845.