Trucking Invoice Factoring | FundThrough

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WHAT'S IN THIS GUIDE

1. What is Trucking Invoice Factoring?

2. What Are the Types of Trucking Company Invoices?

3. How Does Invoice Factoring Work for Trucking Companies?

4. What Are the Benefits of Invoice Factoring

5. Are There Different Types of Trucking Invoice Factoring Rates?

6. What Documents Do Trucking Companies Need for Invoice Factoring?

7. How to Choose the Best Trucking Invoice Factoring Company

8. Why Trucking or Freight Invoice Factoring is Better Than a Bank

Trucking Invoice Factoring FAQs

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If cash is king for all businesses, it is an emperor to companies in fast-moving, high-volume industries such as trucking. You need to be cash-flow positive all the time to compete. Here’s why. At the minimum, you’ll need ongoing cash and the available revenue to pay truckers, buy fuel, repair broken-down equipment, and fund other expenses.

Besides, the typically thin margins for trucking companies need a high cash turnover rate to have a shot at being profitable. Invoice factoring for trucking companies, or freight factoring, presents a solution to these cash flow challenges.

What is Trucking Invoice Factoring?

Invoice factoring for trucking businesses involves selling your unpaid invoices, also known as accounts receivables, to a factoring company (or invoice factor) at a discount to receive payment faster. When you work with a truck factoring company, you no longer have to wait for months to get paid. In fact, thanks to our innovative technological process, FundThrough can offer same-day funding for your unpaid freight bills.

Small- and medium-sized trucking companies that may qualify for freight factoring services include freight brokers, trucking fleets, professional services, owner-operators, companies with 1-5 trucks, semi-trucks, freight businesses, dump truck haulers, a broker, large transportation fleets, over-the-road operators, single drivers, and more. If your trucking business has cash flow and working capital issues, FundThrough has a solution.

What Are the Types of Trucking Company Invoices?

Traditionally, invoice factoring, as a whole, is classified in several different ways. Here are two common types of factoring classifications:

The first classification is based on how and when you can use invoice factoring to finance your trucking business.

There are three options here:

Whole turnover: You have an ongoing (typically a 12-month) agreement to sell all your invoices to an invoice factor. That is, you don’t get to choose which invoices to factor. Whole turnover factoring tends to carry less expense of the three types.
Selective factoring: It also requires an ongoing agreement with a factor, but here, you have the flexibility to select the invoices to factor. The ongoing relationship makes it cheaper than spot factoring.
Spot factoring: This is similar to selective factoring in that you can choose the invoice to factor, but the factor treats this as a one-time transaction with no expectations of future business. You are likely charged a flat fee.

The second classification is based on the type of agreement you have with the factor.

Recourse Factoring: This is the most popular type of invoice factoring service, and it means that your company must buy back invoices for which the factor couldn’t collect payment. Recourse factoring tends to attract lower fees since the factoring company doesn’t purchase the liability of defaulted invoices. Recourse factoring may be ideal for trucking companies whose clients have stellar credit ratings (i.e., they typically pay their invoices when due). This option could also be ideal for larger companies with the resources to cover unpaid invoices.
Non-Recourse Factoring: Here, as you’ve probably guessed, the factoring service company acquires the liability of all unpaid invoices. The fees for non-recourse freight factoring may be higher than in recourse factoring to compensate for the additional risk that the factor is taking on. Smaller trucking companies that can’t afford to cover bad debt may benefit from non-recourse factoring.

We call these classifications traditional because they can make the invoice factoring process more cumbersome than needed, albeit still simpler than traditional loans from banks.

Next-gen factoring companies like FundThrough eliminate the restrictive terms and process by using technology to facilitate an ongoing relationship while offering trucking companies the flexibility to select the invoice(s) to factor.

How Does Invoice Factoring Work for Trucking Companies?

The following example illustrates how your trucking company would do invoice factoring online.

Your company delivers loads and sends invoices to its customers (business and usual).
Open an account online with an invoice factor if you don’t have one. You can get started with FundThrough here. You’ll need to provide a few business documents.
Once the account set up is complete, upload your invoices and select the ones you’d like to factor. FundThrough integrates with major invoicing platforms to allow you to upload invoices whichever way works for you.
The factoring company reviews your application and determines what percentage of your invoices it can factor. With FundThrough, you may qualify for an advance on the entire invoice amount.
The advance amount, less the factoring fee, arrives in your bank account within 24 hours and you can get back to delivering loads.
Your customers pay their invoices to either you or the factoring company — depending on your factoring agreement.

What Are the Benefits of Invoice Factoring

The trucking industry’s fast-paced nature means that easy access to financing can be a competitive advantage; however, factoring your invoice online can be particularly appealing for the following reason.

Easy approval: Longer-term financing options such as loans from banks have a lengthy application and approval process. Add that to the need for a stellar credit rating, minimum annual revenue requirements, and in some cases, collateral. The opportunity cost of the time spent chasing traditional financing options could make invoice factoring worth it. The only collateral required is the invoice of the job already done.
Fast cash to solve cash flow issues: An online invoice factoring company like FundThrough would typically review your invoices and send money to your bank account with one day. That’s an immediate improvement on the 30 to 60 days waiting period for invoice payments and several weeks for processing loans. And if you want additional freight factoring funds, you can request it online anywhere and anytime.
Flexible contracts and terms: With FundThrough, you can choose to collect the invoice payments yourself or have the company take that responsibility — whichever works for you. Besides, you’re not obligated to sell your invoices. Think of FundThrough as a back-pocket option that you can assess on your own terms.
Transparent Freight Factor Fees: the best online factoring companies are transparent about what it would cost to factor an invoice — without squeezing in any hidden fees. FundThrough also offers competitive rates, superior customer service by phone or email, and often, same-day cash.

With the cash advance you get from your outstanding invoices you can pay for common expenses such as:

operating expenses
office expenses
internet expenses
travel expenses
parking expenses
marketing expenses
utility costs

training costs
broker fees
truck insurance
mortgage payments
and other miscellaneous expenses

Are There Different Types of Trucking Invoice Factoring Rates?

There are two main types of freight factoring rates for Trucking companies:

Flat factoring rates: Here, the factor charges a fixed rate. The flat-rate structure would differ from one factoring company to another. For instance, at FundThrough, our Velocity Invoice Factoring offering comes with a flat rate starting at 2.5% per month.
Variable factoring rates: Conversely, variable rates, sometimes called tiered rates, mean that the cost of factoring each invoice varies — mostly based on how quickly your customers pay their invoices. FundThrough’s Express Invoice Financing offering allows you to finance your invoice for a weekly fee starting at 0.5%. For more information, refer to FundThrough’s pricing page.

FundThrough offers flexible repayment options such as lump sum repayment, early repayment, and skip-a-payment (only for express). That said, you can always speak to the factoring company to work out a fee structure that works for you — especially if you expect to factor large volumes of invoices.

What Documents Do Trucking Companies Need for Invoice Factoring?

Trucking companies would need to provide a few documents for validation purposes. But just how many documents would depend on the factoring company. At the minimum, you would need to provide the following documents:

Business formation documents: This would include items such as LLC Certificates and Articles of Incorporation.
Government-issued ID: Examples include a passport or a driver’s license.
Tax ID: You’ll need to authorize the factoring company to check your business’s tax history. The factor needs to be sure that your business taxes are up-to-date and that you don’t have any tax liens.
MC/DOT Number: The factor needs to confirm that your trucking company has the authority to operate.
Accounts Receivable Aging Report: Recall that accounts receivable refers to the total amount of pending invoices your business has. The aging report is then a table that lists each invoice, typically over the last 90 days, showing data such as the date you invoiced the customer and the length of time the invoice has been outstanding. This report helps the factor determine the financial health of your customers.

How to Choose the Best Trucking Invoice Factoring Company

Factoring Flexibility: Reputable factoring companies should allow you to factor your invoice the way you want. After all, you worked for the invoice. Thanks to technology, next-generation factoring companies can extend advances on invoices without locking you to an ongoing contract for a variety of businesses.
Fee Transparency: You should have a crystal clear idea of how much it would cost you to factor an invoice. Watch out for hidden fees. The best factoring companies would have a page on their website that lists their fees. Alternatively, speak with a representative of the factor to demand a list of all the fees they charge.
Advance Rates: Since invoice financing is a solution for cash flow bottlenecks, you want to make sure that you’re getting as much cash as possible. Traditional factoring companies historically offer between 20% and 30% advance rate (i.e., the proportion of the invoice amount you’ll receive).
Large Advances. While you’ll receive the balance when your customers pay, low advance rates may not provide the sort of positive cash flow you need. Technology-driven factoring companies like FundThough are changing the narratives by offering up to 100% advance rates. Plus, there are no application or setup fees. If you need instant cash within 1 hour-2 hours*, FundThrough will provide the funds via wire transfer for an extra charge of $50.

* FundThrough works with the bank to fund the client’s account. Usually, the bank is flexible and can release funds within 1-2 hours via wire transfer.

Why Trucking or Freight Invoice Factoring is Better Than a Bank

Here are a few reasons:

Trucking invoice factoring is one funding option that offers faster access to funds (typically within a 24-hour period ) against your unpaid invoices. The application and average time for approval with traditional lenders can take weeks.
Turnaround times are fast and because FundThrough leverages technology to automate the manual processes that many traditional financial institutions still use today, the time to funding is fast—in as little as one business day.
A trucking factoring company would extend you an advance even if you have bad credit — as long as your customers are financially healthy. As a business owner, your personal credit score doesn’t matter- there is no minimum credit score, no minimum monthly revenue and no minimum volume of invoices required. Getting a short-term loan or lines of credit with bad credit from a bank can be the biggest challenge, and payment terms are often unfavorable.
Fees are transparent and easier to understand. With a click of a button, you can get access to advanced billing features and payment details. If you were to do business funding or accounts receivable financing with a bank, you might have to pay interest, an application fee, a due diligence fee for UCC lien searches and background checks (a one time fee), ACH fees, a termination fee, and closing fees.
Invoice factoring for your trucking or transportation company with FundThrough is a viable option for businesses in the transportation industry. No loan payments. No added interest. No new debt. Plus, FundThrough works seamlessly with most invoicing software.

Trucking Invoice Factoring FAQs

Your questions answered.

How Much Does Factoring Cost?

It depends on the freight factoring company and the period of time the invoice remains unpaid. But fees can be as low as 0.5% and as high as 5%. FundThrough has a transparent pricing structure of 0.5% per week or 2.5% per month. At FundThrough, you’ll find more options such as flexible repayment, lump sum repayment, skip-a-payment, and early repayment features to help small businesses meet their financial goals.

Can You Work With More Than One Freight Invoice Factoring Company?

It depends on the freight factoring company and the period of time the invoice remains unpaid. But fees can be as low as 0.5% and as high as 5%. FundThrough has a transparent pricing structure starting at 0.5% per week or 2.5% per month. At FundThrough, you’ll find more options such as flexible repayment, lump sum repayment, skip-a-payment, and early repayment features to help small businesses meet their financial goals.

Does it Matter if the Factoring Company Knows Your Business?

Yes. It matters that the Factor you choose to work with understands and has knowledge in your business. FundThrough was launched in 2014 and has become a leader in the financial technology space, funding tens of millions of dollars in invoices every month for large, medium, and small businesses, including companies for trucking. FundThrough knows freight invoice factoring.