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Freight Factoring vs. Traditional Line of Credit: What Is Best for Your Business?

Maintaining positive cash flow is one of the most ongoing challenges that a trucking business faces. Whether it's trying to keep up with demand, fighting against freight shortages, or just trying to get through a nationwide pandemic, having access to working capital can be challenging. Freight factoring, also known as accounts receivable factoring, helps trucking companies have access to their cash flow to stay on top of expenses and keep their trucking company running.


Being paid in 30 to 90 days is not ideal for business owners, and it's not surprise that most trucking companies have a hard time managing their cash flow. Most companies will try to get business financing through a bank line of credit. Getting a bank loan can be tricky for some people, especially small businesses. Trucking companies are often unable to get a business line of credit.


How does freight factoring work?

Freight factoring works when a trucking business sells its unpaid invoices to a factoring company to be advances the invoice amount in 24 hours. The freight factoring company then waits for the customers to pay the invoice at the end of the payment terms. Working with a factor is not reliant on your credit score, but instead the creditworthiness of your customers. Porter provides free credit checks on your customers to verify their credit history so you avoid working with bad debtors.

  • Your business delivers the freight load and submits the invoice and paperwork to Porter.

  • We send you the total invoice amount, minus the small factoring fee, within 24 hours.

  • We wait for the customer to pay us at the end of the payment term.

How is freight factoring different from a bank loan?

A huge difference between a bank line of credit and a factoring line is that you incur no new debt as nothing needs to be paid back. You don't need to pay anything back. Fees are only paid when your invoices are funded directly to you.


Getting a credit line from a bank is the extent of the relationship. The bank gives you the money and you pay it back over time. There is more to a freight factoring relationship. You can choose between a non-recourse and a recourse factoring agreement. Freight factoring companies also offer additional services like fuel cards with advances and discounts, dispatching networks and databases, and good insurance rates. Your factor will also manage your invoicing, billing, and collections to you. Essentially, you get to spend more time on the road operating your trucking business, and less time on administrative tasks.


What are the drawbacks of a bank loan?

Not everyone has heard of factoring and many businesses' first instinct is to go to a bank when they need financing. However, this is not always the best option for a number of reasons:

  • Trucking companies, especially smaller ones, are typically turned down when applying for a traditional bank loan.

  • A bank loan limits your business's growth potential. Freight factoring aids your company's growth.

  • If financing benchmarks are not met, a bank can withdraw the loan or limit it.

  • There are no additional services that add value when you get a bank loan.

Luckily, if a trucking company does get turned down by a bank, they can still get the funding they need through freight factoring. The approval time is a lot faster and getting access to the business's working capital from unpaid invoices makes freight factoring a reliable funding source.


Why you should use freight factoring

Having access to your working capital is important for your success as a trucking business owner. Freight factoring accelerates your access to cash flow to keep up with your expenses.


On top of getting paid quickly, most freight factoring companies offer additional services to help you succeed. Additional services that Porter offer are:

  • Dispatching: We set our clients up with our dispatching database to find them the most profitable loads.

  • Free fuel card: Our clients get our free Porter Fuel Card that offers advances and discounts across the nation.

  • Best insurance rates: We have partners that can provide you with the best insurance rate for your trucking business.

  • Compliance assistance: We can help make sure that your trucking company is in compliance.

For more information, give us a call today at (205) 397-0934 or fill out our online form and a specialist will be in touch.

2112 1st Ave. N. Birmingham, AL 35203

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