The Benefits of Freight Bill & Invoice Factoring For Trucking, Brokers, and The Transportation Industry

In the transportation industry, becoming familiar with freight or transportation factoring can provide financial solutions and benefits. With invoice factoring companies for trucking companies can grow and maintain consistent cash flow, obtain funding despite bad or no credit, and drive operational improvements to help the business continue to grow. As freight factoring continues to gain in popularity, Grandview Research states, “The global factoring services market size was valued at USD 3,235.88 billion in 2020 and is expected to expand at a compound annual growth rate (CAGR) of 8.4% from 2021 to 2028. The current growth of the market can be attributed to the increase in open account trade.” As freight factoring continues to carve its niche as a high-value service , why wait to experience the benefits of this fast-growing trend? Rather than missing out on the opportunity to make more money and avoid the slow payment of  invoices from affecting the companies’ growth, work with a partner that can provide a seamless, stress-free experience. 

Defining Freight Bill and Invoice Factoring

Freight bill funding is a working capital solution that can help a trucking business by ensuring prompt payment rather than waiting weeks or months. . This immediate payment will be a game-changer for the weekly or monthly budget, allowing the company to cover expenses without incurring debt. With the best invoice factoring service, innovative technology and a web portal to upload paperwork are available to ensure the factoring company receives everything in a timely manner. For invoice factoring for trucking companies have the option to use non-recourse or recourse factoring. Non-recourse factoring contracts protect the company if the client does not pay the company a higher fee. Recourse factoring is cheaper but does not cover the loss from the debtor. 

Why Truckers Leverage Factoring Services

Even for freight companies that routinely turn a profit, cash flow problems continue to rise due to conflicting payment terms between shippers and carriers. Trucking companies need to have immediate, consistent cash flow, opportunities to obtain funding despite bad credit, and save time and money on operational management. Profit margins can be slim for trucking and transportation companies due to heavy competition and the lowest bidders often securing the jobs. This is why many carriers rely on freight bill factoring to increase the company’s cash flow. The service allows carriers to receive payment in one or two days with significantly  less paperwork than what is required with a business loan. 

Improved Cash Flow, Less Stress, Improved Cash Management and More

Rather than having to wait weeks or even months for payment, invoice factoring companies have same-day or next-day payment options. One of the key benefits of factoring services is that the trucking company will have more funds to pay for fuel, salaries, equipment, repairs, and other expenses without using a credit card or other finance options. Having consistent cash flow ready for immediate use can be beneficial when surprises arise such as fuel prices spiking or emergency truck repairs are needed. Additionally, knowing the payment is secure will take a lot of “what-ifs” out of the day-to-day stress of the company, knowing the payment happens sooner rather than later. To avoid a delay in the business even during fluctuation, factoring trucking receivables can provide the right financing option.

Additional Benefits of Freight Factoring

For any trucking company, it is a constant struggle to manage fuel costs, find responsible drivers for more loads, and maintain sufficient levels of cash flow. Seek out invoice factoring for trucking and learn about the benefits freight factoring can have for their business for just a small fee. Whether the company has a fleet of 50 trucks or is a small business, freight payment service providers can provide the money quickly every time. In addition to consistent cash flow and less stress, the best invoice factoring service  provides other benefits that include:

  • The ability to pay out expenses and take on more loads than the company could before. Increased cash flow provides more opportunities to invest in a new truck and pay additional drivers to pick up more loads. 
  • Factoring can eliminate employees’ time spent on invoicing, following up on invoices, collections, or checking on payments. This will free up time in the business to focus on other areas, resulting in greater productivity and profitability.
  • A factoring company can absorb the loss of the invoice while still paying out if a broker goes out of business or cannot pay for a load. Factoring will add protection from bad debts due to non-recourse factoring agreements.
  • Rather than waiting for payment, having instant pay can increase the competitive advantage for a trucking company. Since extended terms no longer affect the companies’ cash flow, better payment terms can allow new accounts.
  • Using trucking invoice factoring can allow companies to gain financial leverage with suppliers and vendors, as capital in hand allows for better negotiating terms and more savings.
  • Less hassle in managing overall freight finances and keeping costs in check by working in a low-fee, no-nonsense freight factoring solution like HaulPay.

To grow the business without the constant headache or stress of cash flow, freight bill funding can make it happen. The funding provides the recipient with an increased sense of security for payroll or o fund any new equipment needed To see these benefits and more, no matter the size of your business, partnering with the best invoice factoring service can do that and more.

Leverage Factoring Through ComFreight to Thrive Now

Rather than relying on customers’ payment and hoping for a creditworthy deal, factoring for trucking companies can provide the security and leverage needed in today’s market. Freight payment services can benefit shippers, brokers, and carriers to grow the business and ensure consistent cash flow. To stay ahead of the rest and gain the competitive advantage needed for the fast-paced transportation market, reach out to the best invoice factoring service today and request a demo of HaulPay from ComFreight to see how the platform improves freight payment processes.

Why Freight Factoring for Both Carriers & Brokers Should Be Radically Transparent, Cost-Effective & Fee Lite

Customers have access to all sorts of information and digital platforms to have full transparency when partnering with the best freight factoring companies. Transparency not only makes for happy customers,  it also can improve efficiency within the company. This is not something that has to be a hard sell to the customer; rather, it’s better to set straightforward realistic expectations that can save time for more critical decision-making.

Radically Transparent Fee Structures Lead to Increased Efficiency

For some companies, the thought of giving customers access to information that may not show the company most positively has no benefits. When discussing the benefits and outcomes from transparent fees, Forbes states, “Potential clients respond well to straightforward talk about what we can and can’t do for them. Since we don’t over-promise, we’re less likely to underdeliver. The result? An industry-leading client retention rate and happy customers whose goals are met.” Customers want transparency and honesty. Having that complete open information about pricing and products will set up the company for more success and growth.

It Builds Trust With Your Customers

Transparency is critical for creating trust with customers and for a company’s overall success in sales and growth. The term implies operating effortlessly for the customers to see and verify the promised performed actions. For freight finance to be handled in any season and provide proper financial assistance, companies should remember simplicity, openness, communication, and accountability. Companies shy from practicing transparency internally, in turn causing hesitation to offer the same to their customers. Transparency allows for customers to have all the information needed to purposefully engage the company on provisions before the purchasing process.

 

Fee-Lite Solutions Make Cash Flow Management Easier

Factoring with a freight factoring company can provide benefits to shippers and carriers without the added stress of management. When explaining the benefits of freight or transportation factoring for shippers and carriers, Inbound Logistics says,  “It’s the classic win-win: Companies that buy a product or service get one month or more to pay, while sellers get their money in just a few days. Trading partners have used factoring, supply chain finance, and similar strategies for some time to maximize their cash flows. Today, though, advanced technologies are increasing the variety of available financing options.”

Integration Between Systems Makes Leveraging Freight Factoring Faster and More Effective

Freight Factoring companies have the tools and ability to use a variety of components and integrated technology to improve system processes with freight finance. Working with a centralized digital software program can eliminate the need for specific invoicing or tedious paperwork and remove the risk of human error. Integrated systems can allow for improved reporting of freight spending, and where data-driven decision-making may increase cost savings.

Factoring Offers Higher Advances Than Traditional Bank Accounts Too

Rather than having to go through a bank, freight factoring companies can qualify brokers for customers to perform credit checks. Bank loans are uncertain, often come with high interest rates, and take a longer lead time to process—which makes loans less than optimal options for capitalizing on time-sensitive business opportunities. Unfortunately, most small business owners may not meet the rigorous qualification criteria or business collateral needed for approval. Rather than stress over the bank for financing credit options, freight companies have more flexibility to ensure the needs can be met. The credit limit can be inflexible and unsuitable for financing spur-of-the-moment business opportunities. Factoring is an ideal alternative for all businesses, regardless of the creditworthiness or the availability of collateral.

It All Comes Together to Create In-Demand Solutions to Freight Factoring Like ComFreight’s HaulPay

The benefits of freight factoring and transparency can help any business by using ComFreight. Some businesses have the fear that transparent and straightforward discussions will lose customers, but we want to be as honest as possible with the solutions we provide. For a factoring company you can fully trust request a demo to see how the HaulPay platform, powered by ComFreight, works.

Why 3PLs, Brokers & Carriers Need Flexible Freight Factoring

Flexible freight factoring and payment for freight finance can provide shippers with the opportunity to stay ahead of costs and carriers never have to wait long to get paid. Combining an audit with analysis and freight optimization tools significantly boosts the savings potential. Freight transportation is a massive spend category. Ensuring freight bill accuracy and keeping cash flow intact—an essential business need—is critical in today’s freight market for 3PLs, freight brokers, and carriers alike. Freight factoring companies that offer flexible factoring terms and are easy to work with can provide the necessary capital to continue to keep all freight parties’ prepared to keep freight moving without business interruption. Learn why in this article.

What is Flexible Freight Payment and Freight Factoring?

Freight factoring occurs when a delivery is made as scheduled. However, rather than waiting for payment, the freight company or owner/operator transfers or sells the invoice to a third-party freight factoring company, which then pays the invoice immediately, minus a nominal service charge. T. The freight company will continue to focus on other tasks in the business while the freight factoring company handles the invoice and does the waiting for payment in full from the shipper or supplier. Partnering with a freight payment company can also provide more benefits to maximize profit margins and avoid the risk of shippers taking longer than usual to pay.

3PLs, Brokers, and Carriers All Traditionally Rely on Shippers for Payment

Freight factoring companies help shippers and carriers by giving them the majority, if not all, of the funds needed for their company. Shippers may experience a delay in payment or get behind with accounting and invoices, but it directly affects the carrier. Carriers usually have to pay up-front costs like fuel or repairs, which can cause issues if the payment is not received on time. In explaining the billing system, Supply Chain Dive states, “So carriers may not be due for a freight billing revolution any time soon, but that does not mean they shouldn’t embrace it when possible. Companies pay significant amounts of money or expend valuable resources for invoice audits which, as Supply Chain 24/7 suggests, can be better managed by both shippers and carriers upfront.” Using a digital freight forwarding platform can provide shippers with an upfront efficient way to pay carriers and brokers rather than make the businesses wait for payment. Having the option for shippers to pay upfront and carriers to receive the payment allows for companies to exponentially grow without setbacks.

Additional Reasons to Leverage Flexible Freight Payment Solutions

Freight payment, also called freight audit and compensation, refers to specialized systems and processes that manage high volumes of freight invoices and deliver deep business intelligence about freight costs. Companies can help carriers find more capacity while ensuring shippers can make the proper payment on time.  Freight factoring can help any business experience the following benefits:

  • Flexible payment solutions that reduce the risk of carriers not getting paid and still allows shippers to secure the capacity.
  • Immediate payment which can help prevent the carrier from rejecting the load based on the shippers’ ability to pay.
  • Cost structures that are built with flexibility in mind to meet the needs of shippers, carriers, and the ultimate customer.
  • Flexible cancellation policies, provided the software vendor makes that clear. 
  • Easier financing than going through a bank, by o. By obtaining a next-day payment and immediate processing, shippers and carriers can receive the payment almost immediately.

For companies to achieve growth and scalability, the best decision is to partner with freight payment services that can strengthen specific businesses and provide tools to increase efficiency. For freight spending and payment, putting a freight payment solution in place is necessary to effectively manage costs and ensure on-time payments.

Take Advantage of Fast, Easier Freight Factoring and Payment by Signing up for ComFreight Now

Freight factoring can provide a higher level of business intelligence and ​can integrate data from multiple sources, delivering much more valuable information to be used for decision-making and process improvement. To see the benefits of an easier way to handle payments, request a demo to see how the HaulPay platform works.

How Much Do Freight Factoring Companies Charge

Freight factoring is a specialized form of freight financing or financial factoring that seeks to get trucking companies paid for services before shippers and brokers pay the actual invoice. Finance factoring, including truck or freight factoring, is expected to grow at a compounded annual growth rate (CAGR) of 8.4% through 2028, according to Grand View Research. This is evidence that companies need more substantial cash flows and a shorter payment clock. However, shippers and brokers do not always have their financial systems in place to offer those advantages. That’s why more trucking companies are turning to freight factoring services to get paid faster and use those funds for working capital that supports day-to-day operations. Let’s take a closer look at how invoice factoring works, what fees might apply, and the benefits of factoring.

What Does Freight Factoring Mean and How Invoice Factoring Works

Freight or transportation factoring is a process by which a freight factoring service provider advances the amount of an invoice and keeps a portion as a reserve. Factoring is essentially an upfront loan toward the invoice. The remaining balance is given to the trucking company later after all fees, costs, and other expenses are considered and when the invoice is paid. However, not all freight factoring companies offer the same rates. That’s why knowing how much freight factoring companies charge can be difficult at best. 

There are also two primary types of factoring to consider:

  • Non-recourse factoring protects the trucking business if the broker or shipper doesn’t pay at all. 
  • Recourse factoring puts the trucking company as the responsible party if the shipper or broker doesn’t pay. 

Both forms of factoring may be used depending on the number of invoices and their total value. Regardless, the whole point of truck factoring rates is to give trucking companies a set expectation for payment within a few days or mere hours of delivering an order. 

Other Fees Might Come Into Play

Freight bill factoring rates are highly subjective and depend on the value of the invoice, the freight, and the value placed on the reliability of the shipper or broker. That’s also known as assessing the credit risk of the shipper and broker, and since the freight factoring provider carries the risk, added fees might come into play. These include added collection efforts and potential legal ramifications against shippers and brokers that do not pay by the invoice due date.

Other possible fees include a setup fee, monthly service fee, or even fees associated with recourse factoring. It all depends on what the agreement defines. 

Truck Factoring Rates Might Vary

In addition to specific fees, different trucking factoring rates may apply as well. The rates are designed to offer the most reliable and realistic expectation for payment from a shipper or broker. The rates also depend on the trucking companies’ costs and terms set forth in the agreement. Additionally, trucking factoring rates can be more complex when considering different stops and loads, such as a trucking company consolidating multiple LTL shipments into FT. Other possible influences that could affect rates include delivery days, zones, special equipment costs, and more. Again, this is where asking how much do freight factoring companies charge will become vital in setting expectations upon signing an agreement with set freight payment terms and choosing a factoring servicer. 

Benefits of a Freight Factoring Company Partnerships

Freight factoring offers significant benefits to trucking companies, but many still get confused over how much freight factoring companies might charge. Let’s consider the top benefits of working with a factoring service and how it can alleviate cash flow struggles for trucking companies. 

  • Immediate access to working capital on the same day — in other words, a shorter payment timeframe.
  • Offering higher advances than traditional bank accounting options.
  • Different agreement types to suit almost any shipment.
  • Funding available regardless of size. 
  • Back-office support to handle unexpected issues. 
  • Improved budgeting for future transportation needs.

Know Freight Carrier Payment Terms and Factoring Rates When Choosing a Company

For freight carrier payment management, maintaining a solid working capital reserve can be difficult. That’s true even in times of booming, carrier-strengthened markets. However, not all carriers or trucking companies can afford to wait for weeks or months to get paid on their invoices. Enter the truck factoring companies that have the capital, experience, and resources to save the day. Most importantly, freight factoring companies are experts in contractual language and keep your business’s fiscal health intact. Request a demo to see how the HaulPay platform works to take advantage of our unique freight factoring service, HaulPay.

What is Freight or Transportation Factoring?

Freight factoring, or transportation factoring, is a financial service that will financially benefit the cash flow for the business by cutting out the waiting period for payment. This will allow freight companies to perform business as usual while the freight factoring company waits instead. And by capturing data, it’s easier and faster to get payment and leverage better working capital. This includes more traditional means of freight payment too. Nearly every freight bill company can process invoices accurately and efficiently, but experts and industry officials contend that even more streamlining comes from examining how to enhance working capital while providing carriers timely, predictable payments,”  according to an article in Logistics Management. With more time to focus on higher priorities, owners can turn their attention to finding more hauling contracts and gaining more customers. Taking freight payment data analysis into consideration when deciding on freight factoring will allow for a knowledgeable, more informed decision to accelerate company growth. This will allow for oversight of the advancements freight factoring can have on any business.

Defining Freight Factoring

A more straightforward way to explain what is factoring in the freight trucking industry is picking up the goods from one location, delivering them to the next, and being paid for the service by the shipper or broker. The profit is the amount paid, minus costs for delivery for the cargo; usually, this will be paid an average of 30-90 days after. However, with freight factoring, when selling the invoice for a load that has been hauled, rather than waiting to be paid, cash will be received immediately. Freight factoring services and following up on trends that are transforming the trade will allow for benefits and advancements to be made throughout the company. For some freight companies, predominantly privately owned, this will highly benefit the weekly or monthly budget. Instead of waiting on payment, an invoice can be transferred or “sold” for the job to a third-party company. By buying the invoice for slightly less, it will make up for it by being paid immediately.

transportation factoring

Why Would a Company Choose to Use Freight Factoring?

When deciding whether or not to use freight factoring, try looking at how the business can benefit or hinder the company’s growth. For best transportation factoring, the main goal for most, if not all, interactions is to gain profit at a positive and quick rate and achieve growth throughout the company. For smaller or privately owned businesses, the immediate payment with factoring will benefit weekly or monthly budgets. In other cases, freight factoring can be beneficial if operations are suffering due to any of these reasons:

  • Difficulty achieving overall growth. 
  • Lack of staff or technological capabilities to manage communication and payment collections.
  • An inability to consistently pay vendors on time due to slow-paying customers.
  • Lack of cash flow negatively impacts business growth.
  • Struggling to obtain financing through a bank and risk paying interest rates.
  • Susceptibility to fraud in your trucking business as well as credit risks. 

How Freight Factoring Streamlines Payment Management

Freight factoring can be very beneficial when helping to manage business finances and credit. Getting paid immediately rather than later gives businesses the capital needed to fund both operational and capital expenditures that drive growth. With someone else handling the billing and collecting, the end results will yield increased profits while removing the hassle of an arduous task from back-office personnel. Every year numerous new trucking companies enter the marketplace. Using antiquated avenues to funding —, for example, banking — makes it more challenging to secure financing. 

freight payment management

The main goal for all for-profit companies is just that — to generate as much profit as possible. However, if there are more “payouts” than “pay-ins” on the balance sheet, many companies would turn to bank loans as a solution, which can result in thousands of dollars being spent on interest payments. Freight factoring is a much better alternative; with money in hand, the business can continue as usual. This, in turn, paves the way for more customer acquisitions, which will generate more profits. In other cases, a transportation factoring company can make sure that the broker’s or shipper’s ability to pay will help mitigate credit risks and the greater risk of incurring losses rather than profits. 

The Strong Benefits and Advancements Behind Modern Freight Factoring

The most beneficial impact of freight factoring: same-day pay once the invoice is submitted and processed. This will afford more capital and greater cash flow for the company while enabling staff to focus on making phone calls to collect funds and managing invoices. Trusting freight factoring to foresee the back-office tasks will also heighten the probability of technology advancements. Generating more profits and increasing overall efficiency will help companies to readily embrace options such as cloud-based technologies, artificial intelligence, and machine learning based on big data. Technology advancements can help optimize growth throughout the company or allow for modernization, with one example being customizable digital payments. These advancements provide for more flexibility and processes outside of a physical location, which will be very beneficial as economies continue to slowly emerge from the global pandemic. 

Reap the Rewards of Freight or Transportation Factoring with HaulPay

No matter the size of a company or how much it has grown, there is always room for technology advancements and optimization of processes. Every company strives for the best possible resources to drive company growth and customer acquisition. Freight factoring can provide numerous benefits, such as increased cash flow, overall business growth, and reduced hassle of managing back-office tasks. To experience these benefits and achieve overall business growth, request a demo to see how the HaulPay platform works.

The Ultimate Guide to the Ins and Outs of Freight Factoring

freight factoring

Stuck in a financial rut with no financial options left? For trucking companies in need of urgent financial help, freight factoring may be something to consider.

Not sure what that is? Let alone, if it’s right for your financial situation and business?

We’ve got you covered; read on to learn trucking factoring basics including what it is and the pro and cons that come with it.

Freight Factoring Explained

One thousand of the biggest public U.S. companies took an average of 56.7 days to pay their bills in 2017. This is up 3.4 points from the year before (2016).

So if you’re waiting for that invoice two months in you’re not alone. With operating costs adding up, a walk to the bank for a loan may seem like a good idea.

As Syracuse University professor, Kenneth Walsleben, told the New York Times (NYT) going to your local bank for a loan are long gone.

He tells NYT that small business now can turn to more creative lending options, many of which are more expensive than traditional loans. With time and more demand for creative lending, Walsleben mentioned to NYT that some of these alternative loan options have gone down.

The key word to remember? Some. What does this mean if you’re looking for an alternative loan? Research, research, research. (But we’ll talk more about this later.)

Some types of alternative loans borrowers can search for include lease-back and nonbank loans, peer-to-peer loans, asset-based lending, and, yes factoring, plus more.

So What is Freight Factoring?

Freight factoring is a type of alternative financing.

Trucking companies that are stretched thin can sell a part of their invoices to a third party (aka a factoring company).

In a couple of days, the factoring company gives the trucking business a percentage of the invoice value.

This is the biggest perk considering trucking companies might wait a couple of months before receiving that same money from the client (but read on, there’s more).

Once the clients pay the invoices, the factoring company gives the trucking business the balance. The trucking company also pays a factoring fee or transaction fee.

The Trade-Off: How Much Do Factoring Companies Cost?

Is it cheaper for trucking companies to wait for the customer to pay the invoice? Yes.

But, waiting for 14, 30, or 60 days for that paid invoice may not be an option for trucking businesses neck high in utility bills with payroll coming around the corner.

Here’s the trade-off: You pay more for access to available funds right away. Or, you save more and wait for clients to pay.

Who is Trucking Factoring For?

Like most forms of alternative loans, freight factoring is a financial option for trucking businesses that are out of options. They’ve repeatedly applied and have been denied for traditional loans from banking institutions.

They’ve opened up and maxed out several lines of credit, and have played the credit card game of opening and maxing cards.

Family and friends already have donated or loaned their business money and don’t have any more money to give.

With operating costs stacking up and a pile of overdue bills that still need to be paid, such trucking operators are out of traditional and less expensive options.

On the edge of bankruptcy, freight factoring may be an option for trucking companies to consider.

Think of it as a temporary, financial crutch to help your business get back on track.

A Possible Option for New and Seasoned Trucking Companies Out of Financial Options

Load factoring can be for new trucking companies just starting, that need financial help with start-up costs.

They can’t get a traditional loan and have already bugged family and friends for donations and loans. Let alone, they’ve depended on credit cards to get them by the start-up phase but have little to no available credit left.

It can also be for more seasoned trucking businesses that want to expand and need help to make up the financial gap. Like with the start-ups, they’ve explored traditional financing and are out of short-term options.

Thinking of Freight Factoring? Some Things to Consider

For those interested in load factoring, here are some basics you need to know.

1. Shop Around

Be it auto insurance or a personal loan or freight factoring, shop around. Get quotes from at least three, if not four factoring companies. That way, you can compare each and choose the one that best fits your financial and business needs.

2. Do Your Research

Check the Better Business Bureau (BBB) to make sure the factoring company is legitimate and has good reviews.

Search other review sites and see what prior customers have said about their service. Also, become familiar with basic factoring terms like the difference between recourse factoring and non-recourse factoring.

Just like with negotiating a car, why not use your research and many quotes as negotiating chips to help you secure a lower factoring fee?

3. Know What You’re Paying For

Does the factoring company offer non-recourse factoring, recourse factoring, or both? Which do you prefer?

A quick look in the Factoring Glossary and you’ll see that recourse factoring is a type of factoring where the third-party company does not pay up if a customer defaults on their invoice.

Non-recourse factoring is the opposite. When customers default on their invoices, the factoring company takes the loss. Meaning, the trucking company won’t absorb that loss of cost.

Usually, non-recourse factoring is riskier for factoring companies. Trucking companies that choose this type of factoring can expect to pay more.

Also, according to the Trucker’s Report, ask factoring companies what expenses your company will pay. Some factoring companies may only charge a factoring fee.

But don’t be surprised if there are other costs tacked on.

The Trucker’s Report also encourages trucking companies to ask about if the factoring company charges per load. A per load basis may be a better choice for trucking companies that don’t want to have all their invoices go through the factoring business.

Other topics to ask the factoring company include:

  • Downpayments
  • Interest rates
  • Credit scores
  • Contracts

The Takeaway

Without other financial options, freight factoring can be a great temporary financial cushion.

If considering this, make sure to do your research, talk with your attorney, and secure several quotes. Have any more factoring tips? Leave a comment below. Any questions? Feel free to contact us today.