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Freight Factoring Helps Fleets Succeed

Freight Factoring Helps With Trucking Company Expenses

July 1, 2020

freight factoring enables fleet owners to control costsWe asked our freight factoring customers what some of the trucking company expenses they think are the most significant. The majority of the answers were fuel, repairs and tires.

  1. Payroll: Meeting payroll is one of the biggest stresses of running a trucking fleet. Countless fleet owners have laid awake at night wondering how they’re going to meet payroll in a couple days. Factoring eliminates that stress and covers the expense.
  2. Fuel: No matter if the price of fuel is high or low, this is still one of the biggest trucking company expenses. The U.S. Department of Energy also realizes fuel is a big expense. According to an article by the department is providing funding for a $1.5-million project between Bridgestone Americas and PPG that will focus on improving the fuel efficiency of truck radial tires.
  3. Repairs: Our customers stated that motor and transmission repairs are their biggest worry when it comes to trucking company expenses.
  4. Tires: Just like there are for your car, trucks have different levels of tires. While you can try to cut back on your trucking company expenses by purchasing a cheaper tire, it may not last as long.

As you know, there are many other trucking company expenses, but the four listed above were the most common ones our customers think about. Luckily, with financing solutions like freight factoring, our customers can get the cash they need to pay their company expenses.

9 Common Questions About Freight Factoring

freight-factoring-trucks1. What is freight factoring?

Freight factoring is a common financial transaction where a trucking company sells its accounts receivables to a third party (factoring company) at a discount.

2. How does it work?

Your trucking company will choose a factoring company and sign a contract. The company will do research on your customers to give you a maximum amount of the invoices you can factor.

Your clients will get a notice of assignment from your factoring company letting them know where to send future payments.

Instead of sending your invoices to your customer, send them directly to your factoring company. The factoring company will advance you a percentage of the invoice, usually around 90%.

Once the factoring company collects the funds on the invoice from your customer, it will pay you the remaining balance, minus a small factoring fee.

3. What are the benefits of freight factoring?

One of the greatest benefits of freight factoring is that you will get paid on your invoices in 24 hours or less. Some factoring companies, including Scale Funding, have added financial services such as accounts receivable management, credit analysis, risk assessment, fuel cards and treasury.

4. How can freight factoring help with my trucking company expenses?

Since you are no longer waiting 30 to 90 days for customer payment, you are able to pay your trucking company expenses on time. Companies using factoring can schedule and make payments with confidence because they have reliable cash flow in the bank.

5. How can I get fuel cards by freight factoring?

If you use Scale Funding as your factoring company, we have a fuel card program that is accepted at over 10,000 truck stops, fuel stops and travel centers nationwide. They money we pay you on your invoices can go right into your fuel cards if you choose.

freight factoring6. What is the difference between recourse and non-recourse factoring?

Recourse factoring is the most common form of factoring in the accounts receivable finance industry. Recourse factoring means that if an invoice isn’t paid within a certain amount of days, usually 90 or more, the freight factoring company retains the right to sell back the invoice to the company.

On the other hand, non-recourse factoring is when the freight factoring company assumes all of the credit risks for the collection of an invoice. No matter how long the debtor takes to pay, the freight factoring company will wait on the payment.

7. How do I know if I should use freight factoring?

If your business can answer yes to one or more of the following questions, freight factoring could be the solution for you.

  • Are your customers taking 30, 60 or 90 plus days to pay you on their invoices?
  • Do you need to get caught up on some bills?
  • Is your company growing?
  • Do you prefer not to work with a bank?
  • Did your bank say no?
  • Are you looking for a steady cash flow?
  • Do you need some back-office support to help with your invoicing and collections process?

8. How do I know if I qualify for freight factoring?

Unlike bank loans, most freight factoring companies will look at the credit and risk of your customers, not you. Scale Funding will make sure that all of your customers have good credit and are able and likely to pay their invoices. If you choose factoring with Scale Funding, we will also look at any new customers you bring on to make sure you will get paid for the work you do.

9. How do I know which freight factoring company to choose?

There are many variables to look at when choosing the best factoring company such as advance rate, freight factoring fees and additional services it might provide. Make sure the freight factoring company you choose has the flexibility and support your trucking company needs.

Start freight factoring today and worry less about your trucking company expenses.

If freight factoring sounds like it might be the right fit for your trucking company or if you have questions, contact a financial expert at Scale Funding or call (800) 707-4845.