Freight Factoring for Small Trucking Companies
Updated: Mar 16, 2020
Freight factoring can be beneficial for any sized trucking company, but it is especially worthwhile for small trucking companies and owner-operators to get consistent cash flow to run their business. It's hard for anyone to wait 30, 60 or 90 days to get paid, which is why freight factoring is ideal for small trucking companies or owner operators.
What is freight factoring for small trucking companies?
Freight factoring is a type of financing to improve a company's cashflow instead of them waiting to get paid on an invoice. A factoring company buys the accounts receivables of the client so that they can get immediate cash upon sending their bills in. There are typically two different freight factoring programs: non-recourse factoring and recourse factoring. Non-recourse factoring protects you from clients that don't pay on time, or at all, for a load. The factoring company takes the risk to protect your trucking company. With recourse factoring, you take the risk if your client doesn't pay or pays late, and the factor holds a small portion in reserve until your client makes the payment.
Typically, small trucking companies will benefit more from a non-recourse factoring agreement, as they are avoiding losing money if a client doesn't pay on an invoice. It is also good for small trucking companies as the factor should handle all invoice and paperwork processing. You're able to focus on making money and hauling loads, while the factor takes care of back office paperwork.
How does freight factoring work for small trucking companies?
Once you sign up with a freight factoring company, they will approve the brokers and shippers that they can work with, and you can start factoring your freight bills immediately. There are 4 basic steps that take place in the freight factoring process:
You book your load and receive a rate sheet confirming the agreed amount for the load.
A BOL is signed to confirm the pick-up. The BOL is then signed by the receiver to confirm the drop-off of the load.
Once you have dropped the load, you send the BOL, along with the rate sheet/confirmation to your factoring company. Most factors will accept you taking a picture of your freight bill and sending it that way - Porter Billing does.
Your freight bill is verified, and your factor will advance you the money (minus the factoring fee) which will be available to you typically the same day via your preferred funding method. If you have a recourse agreement, you will receive the agreed upon advances rate within 24 hours. Then once the invoice is paid by the customer, you will receive the rest of your reserve minus the factoring fee.
Advantages of freight factoring for small trucking companies
Consistent cash flow
Quick payments - get paid in 24 hours
Fuel cards - you get a free fuel card with advances and discounts when you factor with Porter
Profitable loads - Porter sets you up with a dispatch consultant to find you the best paying loads
Simplicity - you can work with multiple brokers and send all your invoices into one place to get paid
Growth - the consistent cash flow that freight factoring provides you with, allows you to afford additional expenses of expanding your business
No debt to repay - freight factoring helps you avoid debt
Porter Billing specializes in freight factoring for small to mid-sized trucking companies. For more information on why freight factoring is the right choice for your trucking company, call us at (205) 397-0934 or get a free quote now.