Perhaps more than any other industry, businesses in freight, trucking and transportation heavily rely on invoice factoring to grow and sustain their business operations. In fact, the IFA’s 2017 industry survey found that over a third (36.4%) of factoring funding comes from the transportation industry. From flat-bed carriers to mammoth 18-wheelers, freight bill factoring enables these businesses to keep their proverbial and actual wheels turning. Buy why is that?
Trucking Factoring Covers the Cash Flow Squeeze
Many small- and medium-sized businesses in a range of sectors have problems with cash flow. Corporate clients are slow to pay their suppliers and expenses are often higher than projected while sales are lower.
Yet trucking is subject to even more carrier cash flow problems can be routine rather than sporadic. The gap between when a trucker’s load is delivered to when they receive payment is lengthy even when compared to other businesses. This tends to be true in large and small trucking outfits and is part of the texture of the trucking industry. Transportation factoring tightens this cash flow gap by allowing trucking companies to receive payment without delay.
Freight Bill Factoring Offers Flexibility
Moreover, trucking is not like other businesses where there is a regular ebb and flow of business. The business of hauling goods is unpredictable and involves waiting, bidding on jobs, traffic delays, and other slowdowns.
Factoring for trucking companies is an ideally suited option because you can collect cash on a case by case or load by load basis. Business loans, which require long term planning and consistent, predictable revenue generation, are oftentimes not suitable for transportation.
Freight Factoring Rates Are Competitive
When it comes to freight or trucking factoring, it’s a buyer’s market as it were and freight factoring companies must compete for your business. One way they do this is by offering low rates, flat fees and little extras such as fuel cards. Moreover, because freight factoring relies on the credit of your client rather than your business, it is an accessible option that is within reach of even the smallest trucking firm.
The vast majority of trucking and transportation business are small outfits with a dozen or so trucks. New trucking businesses come to life every day, and for most of these companies, applying for a business loan is simply out of reach.
As long as this new business has a verifiable, credit-worthy client they can get cash when they need it with trucking factoring. They don’t need to be established in business for a certain number of years, have a proven business plan, or demonstrate profitability. All they need is an invoice that they are waiting to get paid on. For instance, with services like spot factoring, it is possible for truckers to get paid on a single invoice so that they can pay for fuel, insurance and pick up their next load.
Covering cash flow gaps, flexibility, competitive rates and accessibility are just some of the top reasons account receivables financing is a popular choice for those in transportation and freight business.