The shipping industry is an integral part of business, but most independent drivers or truck companies can wait up to 90 days to get paid by shippers and freight brokers. In order to reduce the waiting period and maintain a healthy cash flow, people are turning to freight bill factoring.
How does freight bill factoring work?
Instead of submitting an invoice to a shipper or freight broker, the driver sends the invoice to a freight bill factoring company. The freight bill factoring company then makes funds available (usually within 24-48 hours), minus a nominal fee. From that point, freight bill factoring company seeks out the payment from the shipper.
What are the advantages of freight bill factoring?
First and foremost, freight bill factoring cuts down on the waiting period to access funds. Secondly, freight bill factoring eliminates the time and resources used to track down payments. Once you work with a factoring company, that headache becomes theirs, not yours. With a steady cash flow, you can use those funds to grow your trucking business, invest in new equipment, or hire additional drivers. The money you get from the freight bill factoring company is essentially revenue, so it can be spent as needed.
Is freight bill factoring short-term financing?
There was a time when freight bill factoring was considered on the same level as a short-term loan. Drivers would submit a lot of aging or delinquent invoices at once in order to get access to funds. However, many independent drivers and trucking companies use freight bill factoring in order to maintain a healthy cash flow. The more jobs drivers take, the more funds they will have access to as they submit their invoices to the freight bill factoring company.
When is the best time to use freight bill factoring?
If you are waiting on invoices with different aging periods (30, 60, 90 days) and want to get access to the money you are owed in a quick and timely manner, then you should consider working with a freight bill factoring company. If the need for funds outweighs the fee charged by the factoring company (sometimes up to 20%), then freight bill factoring is a much simpler solution than getting a short-term loan just to boost your cash flow while you wait for shippers to pay you the money you are owed. Racking up debt by taking out loans just to have working capital is no way to run a successful business. If you are tired of hunting down every dollar, and playing the “hurry up and wait” game with aging invoices, look into freight bill factoring, and see how it can help your business.