Want to grow your trucking business but don’t have the funds or resources to earn new clients, pay vendors, or pay your employees? It is time to turn to a new financial method and funding process to help you stay on your feet and stay out of the red zone – but what funding method do you choose?
We have the perfect answer here – by hiring a company that can help pay you any of your unpaid or overdue invoices from clients, you can earn the money that is rightfully yours to help you stay afloat. Instead of waiting for long-overdue payments, delayed invoices, or non-payments, this funding method can help you directly collect payment without waiting for weeks – or months.
We have the ideal funding method that requires just a few easy steps to ensure you do it correctly and fill out any necessary paperwork and documents. To get started, you have to find the company you trust with your invoices – make sure you do enough research to choose a reputable and high-quality business with the proper qualifications and reviews.
After finding the perfect business, you should make sure they go through all of the following steps to make sure they are the most efficient with your time and money!
Freight factoring steps
To understand how freight factoring can help your trucking business, you need to know each step of the way to see if this is the correct financial procedure that is best for your company. In some cases, you may find that freight factoring is not the best choice – and that’s okay. In this case, you may benefit from getting another type of financial loan, such as a bank loan or personal loan, that can help you keep your business afloat.
However, there are many instances in which obtaining freight factoring is the best choice for your trucking business. If you need instant capital, cash flow, and new clients, paying for a freight factoring business helps you pay your vendors and employees on time. This allows you to continue growing your reputation and expanding your client base.
Without factoring, you would have to pay out of pocket to cover any missed payment on your client invoice. If your client doesn’t pay, whether due to financial strain of their own or they have already gone bankrupt, it is up to you to pay back what you owe. In this case, you could go bankrupt faster than you could be in business.
However, knowing the freight factoring steps can help you choose the best freight factoring business to help your trucking company obtain a steady cash flow and improve your reputation in the transportation industry.
Step 1: Submit the freight factoring bills
The first step in freight factoring for your trucking company is to submit bills to the factoring business. Once you have completed choosing your business and decided who you want to work with, submit the freight bill to your transportation factoring company. You can submit the original copies or legible and legal copies via fax, email, or in-person, giving you plenty of flexibility and versatility. To save time and money, we recommend using online methods to save effort on your part and make it easier to have digital copies.
To qualify for freight factoring funding, the bills and invoices you hand to the company must meet the following criteria: unpaid, accurate (the proper amount), not pledged to another company, and for already completed work. If the bills do not meet any one of the aforementioned criteria, the freight factoring business will not be able to pay you for the invoice.
If you do not meet the criteria for our invoice, you may need to contact the freight factoring company to ask what you can change to qualify for their services. Sometimes, they might not be able to pay your invoice but can work with you for invoices in the future.
Step 2: Verification
The second step in the freight factoring process is to verify the bills, ensure the information is correct with you and the customer, and make sure the amount and name on the invoice are accurate. The last thing you want is the freight factoring business to pay you the incorrect amount or pay you money for another client – double-checking your work is the best way to ensure you are seen in the public light as reliable and trustworthy.
Truck factoring companies typically provide an advance of between 75% and 95% when it comes to the total invoice amount on your bill. Although it is not the full100%, you can find a truck freight factoring business that provides high percentage rates based on your business, reputation, and clients.
Although it is not 100%, you will enjoy a nearly direct deposit of the funds directly into your account typically within 1-5 business days, ensuring you can pay your vendors or employees by the end of the week without any questions asked.
- If your invoice from one client comes out $10,000, the freight factoring business will pay your trucking company between $7,500 and $9,500 almost immediately. Even if you are missing between $500 and $2,500, you will be able to pay many of your expenses with the upfront collateral. Since daily expenditures of trucking companies are usually relatively high, involving truck repairs, fuel payments, and unexpected accidents, having constant cash flow is vital too.
- These advance payments of your invoice from your clients are typically wired directly to your account or applied to a fuel card for fuel advances. Fuel advances mean you don’t have to pay for the fuel of your trucking fleet, ensuring your entire fleet is always filled up before long-haul trips.
After verification, you will either choose whether you are using recourse or non-recourse factoring. Non-recourse factoring involves the freight factoring business paying for any unpaid invoices from your clients. Although this can help startup businesses and entrepreneurs get on their feet, it can also result in less percentage upfront and a higher interest rate in the end. If you are using recourse factoring, you have to pay for any unpaid client invoices to ensure you don’t have any unpaid debts.
Step 3: Business as Usual
This third step in the freight factoring process is easy and simple – you just have to continue what you usually do with your business instead of focusing on the freight factoring side of your trucking company; just focus on delivering your products and services to the best of your ability. The freight bill factoring company will do the behind-the-scenes work, helping collect on freight bills you have factored, contacting new clients and contacting clients who have not paid on invoices.
Since your freight factoring business will talk with the clients who have not paid, you can allocate your resources to more important matters. Instead of calling or emailing clients or sending out your employees to meet them in person and collect a payment, the freight factoring business will talk to the clients directly to ensure payment.
Make sure you speak with your clients before this process to let them know you are working with a third-party company to collect debts.
Step 4: Collection
The final step in the freight factoring process is for the company to collect any debts from your customers and close the freight bills, ensuring you do not have to pay for the unpaid amounts. In case of any non-payments, the type of factoring you choose will determine how it is paid back (non-recourse vs. recourse).
If you factor with recourse factoring, you will typically receive a rebate of the invoice left to pay, not including the freight factoring fee. The freight factoring fee is the service fee the business charges for you using their services. You can start the freight factoring process all over again if you have new freight bills to factor with new clients.
Although these steps seem simple and like you can do them on your own, using a freight factoring company is the best way for a trucking business to get on its feet, stay afloat, earn new clients, and obtain constant cash flow. Since freight factoring companies can help you stay on top of any non-payments, avoid losing clients, and keep your reputation positive in the industry, you can improve your marketing strategy, earn new clients’ trust, and widen your clientele base.
Using a freight factoring business is especially lucrative for trucking companies since many transportation companies require almost immediate capital to sell their services or products. To use a long-haul truck route to deliver products, you need fuel, drivers, and clients. You can only earn these things if you have the cash flow and capital to get started.
Freight factoring can help with just that – freight factoring provides cash flow to pay vendors, income to pay employees, and fuel advances to help keep your fleet ready to go on a moment’s notice.