Industries
Transportation Invoice Factoring
Get invoices paid in days to keep business rolling
Get Started NowWhat's in this guide
- What Is Transportation Factoring?
- How Does Transportation Invoice Factoring Work?
- Benefits of Transportation Factoring
- What Are the Disadvantages of Transportation Invoice Factoring?
- How Does the Transportation Industry Use Invoice Factoring?
- What Is the Typical Charge for Transportation Factoring?
- Transportation Factoring Company: What to Look For
- Trucking Invoice Factoring FAQs
Managing cash flow is vital for transport and trucking companies. On top of making sure the work gets done, you also need to make sure you have enough cash in the bank to make payroll, cover repairs and maintenance for your fleet, pay for fuel and fuel cards, manage trucking operations and equipment financing, and balance the costs of day-to-day business expenses. Add to that the fact that many brokers and shippers pay 30, 60, or even 90 days after being invoiced, leaving you without the working capital you need to cover expenses.
Wait too long to get paid for outstanding customer invoices, and your business might come to a screeching halt. Transportation factoring solves cash flow problems and gives your business the financing and working capital you need to run your business.
What Is Transportation Factoring?
Transportation factoring is a type of short-term financing where a transport or trucking company sells its outstanding invoices to a factoring company, like FundThrough, in exchange for funds ahead of schedule. Once you sell an unpaid invoice to the factoring company, you get a percentage of the invoice value as an advance. The factoring company then works with your customer to settle the invoice according to the original payment terms.
In most cases, you can get a positive cash flow boost in as little as a few days, so you can get back to hauling people, products, and loads.
In a nutshell, transport invoice factoring or freight factoring is a financial service that:
- Provides fast access to cash with little or no waiting period. Many factoring companies can provide same-day or next-day payments.
- Removes the challenge of payment collection from slow-paying customers on your own.
- Gives you a cash flow boost when you need it to go after business growth opportunities.
- Has fewer hassles (including an easier application process and faster payments) than traditional bank financing like credit cards.
- Is ideal for startups and new businesses with little or no credit history, since transportation factoring relies on the creditworthiness of your customers.
- Is not a loan, so you don't have to worry about interest rates, monthly payments, or taking on debt.
- Qualification is much easier than a conventional bank business loan or line of credit.
How Does Transportation Invoice Factoring Work?
FundThrough provides working capital based on the size of your outstanding customer invoices, using a combination of AI and automation to make the funding process fast and easy. Here's how this convenient payment solution works.
Invoice Generation
Transportation companies or those servicing the trucking industry send invoices to their customers.
Invoice Submission
Submit eligible unpaid invoices through FundThrough's online portal for fast funding.
Approval and Funding
Once approved, FundThrough advances the value of your invoice, minus a small fee, in days.
Collection
FundThrough waits for outstanding invoices to be paid by your customers.
See how it works →Put Funding to Work
Cover everyday operating expenses, deal with an unforeseen emergency, or bid on larger projects.
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Get Started NowBenefits of Transportation Factoring
Holding receivables on the books for months costs small and mid-sized transport businesses as much as $3-trillion annually, according to Sage — in simple terms, that means 1 in 10 invoices are not paid on time.
No Debt or Dilution
Transportation factoring is not a bank loan, so there's no debt on your balance sheet and no expensive monthly payments. It's also a non-dilutive source of funding, so you don't give up control of your business to get the cash you need.
Fast Invoice Approval
Invoices can be approved and paid in a matter of days, giving you access to needed funds in a hurry. FundThrough also advances up to 100 percent of invoice value.
Flexible and Easy Process
Create a free account in minutes, all online. AI, automation, and integrations with accounting platforms like QuickBooks make it easy to get funded, and you only fund the invoices you want — there's no monthly minimum factoring requirement.
Grow Your Business
Get the working capital you need to grow your business by taking on bigger hauls, more jobs, staffing up, and maintaining or upgrading your fleet.
Win More Contracts
There's no need to turn away work because you don't have the cash reserves to sustain your business. Freight invoice factoring gives you the cash, and FundThrough gives the confidence to bid on more jobs.
Ease of Qualification
Your credit score, credit history, and time in business aren't as important when applying for factoring — qualifying is a lot easier than with a business loan or line of credit from a bank.
Outsource the Collection Process
It's not easy collecting on your unpaid receivables — that's valuable time better spent growing your business. Factoring takes this off your plate.
No Long-Term Contracts
Once the factored invoice is paid to FundThrough, there's no further obligation on your part.
What Are the Disadvantages of Transportation Invoice Factoring?
Invoice factoring has many benefits for the transportation and carrier industry. Along with the advantages, there are also a few perceived disadvantages.
Transportation Factoring Fees
Some factoring companies charge hidden fees, such as an invoice submission fee, wire transfer fee, or termination fee. With FundThrough, what you see is what you get — no hidden fees, and no cost to open an account.
Less Control
Your customers no longer pay you directly — instead, they pay FundThrough. This means you have less control when factoring transportation receivables.
Difficult to Account For
Some people think accounting for factoring transactions in their bookkeeping software is challenging, but with the right guide it's straightforward.
How Does the Transportation Industry Use Invoice Factoring?
There are many use cases for factoring, and each company has its own reasons for factoring invoices — beyond the obvious use case of getting paid ahead of lengthy net terms.
Growth Projects
Without enough cash on hand, it can be difficult to cover everyday expenses and go after big hauling jobs. Transportation factoring can help bridge any cash flow gaps you might experience during periods of company growth.
Covering Payroll
Trucking and freight companies are often stuck waiting weeks or even months to get paid by their customers. With transportation factoring, you can get outstanding invoices paid in days instead of waiting on extended net terms, so you always have payroll funding.
Purchasing Equipment and Supplies
When a new job comes in, you might have to purchase equipment and supplies to get it done. Transportation factoring gives you access to flexible funding faster than a bank.
Hiring Staff
As your business quickly grows, you need to be able to hire staff to get the job done. Transportation factoring gives you the funding you need, when you need it — even on short notice.
What Is the Typical Charge for Transportation Factoring?
The main factoring fee is also called the discount rate, and is the amount of money that the freight factoring company withholds from the invoice total as their payment for advancing cash and waiting to get paid for you. Discount rates vary across different trucking factoring companies and are based on their own specific criteria, so we can only speak for FundThrough.
With us, you'll always know the cost of factoring before you fund an invoice. We don't charge hidden fees, and there is no cost to open an account. See our pricing page for more info on our freight factoring rates.
Because we believe in transparency, we clearly communicate your total cost of invoice factoring before you fund, so you can make an informed decision.
Transportation Factoring Company: What to Look For
Not all factoring companies are alike. Some specialize in only a few industries, and others may have high fees or lack pricing transparency. Here's what to consider when choosing a transportation invoice factoring company.
Experience
A factoring company with extensive experience in the transportation industry can make the process easier for you. FundThrough has extensive experience helping companies in the freight and trucking industry grow while covering ongoing operating expenses, with the track record to prove it.
Industry Expertise
Payment processes for transportation businesses are often industry-specific. Many transportation factoring companies also have relationships with buyers in the space, which can eliminate the need to make a cold introduction to your customer.
Satisfaction Rating
Any company worth their salt in the freight factoring industry should have positive customer reviews and give you a specific customer service contact who provides prompt, transparent communication. At FundThrough, we provide dedicated account managers.
Easy Account Setup
Many funding companies for transportation companies still use manual paper-based processes that slow down the factoring process. Look for a company that uses technology to streamline and speed up the process.
Advance Rates
It's probably no surprise that the best transportation factoring companies offer 100% advance rates. You need all your money up front so you can make the most of getting freight invoices funded — make sure to compare advance rates.
Fees
Not all companies in the transportation factoring industry are upfront about their fee structure. A company with a flat rate or low rate could end up charging hidden fees, so make sure you know about all fees upfront.
In addition, FundThrough:
- Cuts the average wait for invoice payment by 97%.
- Uses automation and AI to streamline the application and approvals process.
- Is extremely flexible — fund only the invoices you want, when you want. No monthly minimum factoring requirement or long-term obligations once funded invoices are paid.
- Offers unlimited funding. As a revenue-based financing solution, the more you invoice, the more funding you can access.
- Has no hidden fees — upfront pricing.
- Helps you build your business with the money you've already earned — no taking on debt or giving away equity required.
Trucking Invoice Factoring FAQs
Recourse factoring means that your company is responsible for any invoices the factoring company cannot collect on. It is a common type of factoring.
With non-recourse factoring, the factoring company assumes most of the risk for non-payment of customer invoices. There are usually stipulations on which invoices the factoring company will cover. This type of factoring is more expensive.
In these ever-changing times, any company that moves passengers, cargo, and information can benefit from transportation invoicing. Types of businesses include:
Trucking companies, freight brokers, railroads, airlines, marine companies, couriers, automobile transport companies, oil and gas transporters, dump truck companies, shipping companies, fleets, cruise ship companies, OTR trucking, and start-up transportation companies.
Most factoring companies draw up an agreement between your business and the factoring company. In this agreement, there may be a stipulation that you can only work with one factoring company while under contract. Business owners can inquire regarding a long-term commitment, shorter commitments, complex contracts, monthly minimum volumes, volume discounts, and more by reaching out to the industry experts at FundThrough.
What is the difference between Recourse Transportation Factoring vs. Non-Recourse Factoring?
Recourse factoring means that your company is responsible for any invoices the factoring company cannot collect on. It is a common type of factoring.
With non-recourse factoring, the factoring company assumes most of the risk for non-payment of customer invoices. There are usually stipulations on which invoices the factoring company will cover. This type of factoring is more expensive.