What is freight factoring?

Introduction

Freight factoring is a type of factoring specifically designed for the trucking industry. Trucking companies frequently experience delays in receiving payments from customers due to lengthy billing cycles. Freight factoring services provide trucking businesses the ability to get paid right after delivering a load, enabling steady cash flow for covering essential expenses like fuel, driver wages, and maintenance.

The Importance of Freight Factoring in Trucking:
‍
The trucking industry is the backbone of the U.S. economy, moving goods across vast distances. However, delayed payments can cause financial strain, particularly for small trucking companies and owner-operators.

How Freight Factoring Works

Deliver a Load: After delivering a load, the trucking company submits the freight invoice to the client.
Sell the Invoice: The trucking company sells the freight bill to a factoring company for trucking.
Receive the cash: The freight factoring company usually pays you the invoice value, minus a small fee.
Client Pays the Factoring Company: The factoring service collects the payment from the customer.

Benefits of Freight Factoring for Trucking Companies

Consistent Cash Flow: Freight factoring solutions help trucking companies maintain financial stability by providing a constant flow of cash.
Fuel Advances: Many factoring companies offer fuel advances or fuel cards, easing the financial burden of rising fuel costs.
No Debt: Unlike traditional bank loans, freight factoring doesn’t involve taking on debt, making it ideal for smaller trucking businesses.
Risk Management: Non-recourse freight factoring protects transport companies from the risk of customer non-payment, as the factoring company assumes this risk. This is how FactorTek does it.
Support for Growth: Immediate access to working capital allows trucking companies to grow by investing in more trucks, hiring drivers, or accepting more loads.

Reviewed by