In the trucking industry, it’s common to wait for 30, 60, or up to 90 days for clients to pay their invoices. This lengthy payment cycle can stunt the growth of small trucking businesses that rely heavily on steady working capital. The good news is that this wait can be over with the help of a reliable freight factoring service.
A factoring company for trucking can advance a large portion of your open receivables and take over the collections process. Thanks to fast and predictable funding, this can help fuel the growth of a trucking business.
Below, we discussed more about trucking factoring companies and how they can help your fleet grow. Keep reading!
Table of Contents
How do freight factoring companies fuel growth?
Trucking factoring might be the missing piece that will help in the expansion of your fleet. So, how do factoring companies work? Here’s how it can promote growth in your business:
- Providing a steady cash flow. The best factoring companies for truckers will reduce the unpredictability of long payment cycles. By giving you the much-needed working capital, you can cover all expenses and explore expansion opportunities with confidence.
- Reducing administrative tasks. Factoring in trucking will also streamline your collections and accounting, which means less time spent on chasing payments and follow-up calls to clients. This way, you can focus on getting more hauls and boosting your revenue.
- Preserving your credit lines. Instead of getting another loan to cover business expenses, you can consider factoring services for trucking companies. This way, you can preserve your credit lines for more important loans in the future.
- Getting client credit checks. Factoring company trucking invoices also include credit checks on your client. This is to ensure that they have a good payment history to avoid the risk of recourse on the advanced amount.
- Boosting small freights. If you’re an owner-operator, the best truck factoring company can help you expand faster than just waiting for customers to pay. Since you’ll get the amount tied to your invoices, you can plan your expansion, such as getting new trucks and hiring more drivers.
How to choose the right factoring for a trucking company
Factoring services can help grow your fleet only if you find the right provider. If you’re looking for the best factoring company for trucking, you should check for the following:
- Years of experience. You should look for a company that’s been providing freight factoring services for a long time. This is solid proof of their expertise and reliability in terms of flexible funding.
- Factoring contract inclusions. Next, you should check what they have to offer and what the contract indicates. Always ask for the company’s termination clause, pricing structure, recourse and non-recourse rules, and so on.
- Industry experience. Take note that factoring isn’t exclusive to trucking businesses alone. It’s also widely used in manufacturing, construction, healthcare, and other industries. With this, you should ensure that the factoring company specializes in trucking invoices.
- Funding capacity. A freight factor with massive funding capabilities is a good choice, especially if you’re planning to expand your fleet soon. This way, you’ll enjoy a reliable cash flow even as your invoices get bigger.
- Additional services. Experienced factoring companies not only provide funding but also additional services. This includes accounting, bookkeeping, office support, fuel advances, fuel cards, and even dispatch services. Companies with this range of services are a good choice if you’re looking for a one-stop partner.
Red flags to watch out for when hiring a truck factoring company
To make sure that you’ll hire the right factoring company, you should know – and avoid – these red flags:
- They impose long-term contracts. If a factoring company only offers long-term contracts with strict termination terms, you should consider another provider. This could be a trap, which will be a problem if they don’t offer a good service.
- No online presence. Almost every company will put their brand out on social media and the internet to attract customers. So, if your chosen invoice factor doesn’t have a website or social media pages, you should start getting suspicious.
- They charge termination fees. Overall, termination fees are not totally bad, but if the factoring company charges an obscene amount, then it could be a major red flag. Consider looking for another option instead.
- They have spotty credit facilities. Always choose a factoring company that’s backed with a solid credit facility, not just a lending institution. This way, you’ll have confidence that the factoring company can grow with your business.
Conclusion
Factoring services can drive growth and new opportunities for small businesses. Thanks to the steady cash flow they bring, truckers and operators will have more confidence in expanding their fleets.
Still, make sure you partner with the right company that meets your business needs. Always be meticulous, and don’t hesitate to consider multiple providers before signing a deal. Overall, a company that allows the most flexibility is often a good choice.
