.webp)
1 . What is Freight Factoring? →
2. How Does Transportation Factoring Work? →
3. Non-Recourse vs. Recourse Factoring →
4. Benefits of Factoring for Trucking→
5. Freight Bill Factoring vs. Other Financing Options →
6. How Truck Factoring Companies Calculate Risk →
7. How to Choose a Transportation Factoring Company →
Ever feel stuck waiting on payments while your fuel and maintenance bills pile up? You're not alone. Factoring in the trucking industry is a powerful tool many owner-operators and fleet managers use to take control of their cashflow. But simply knowing about factoring and using it strategically are two different things.
Our comprehensive freight factoring guide is here to help you with that. We'll equip you with the knowledge to transform factoring from a vague concept into a powerful tool for your trucking company. We'll also break down everything you need to know, ensuring you make an informed decision about factoring and its potential to take your rig to the next level.
Get ready to streamline operations, improve cashflow, and put your trucking business in the driver's seat.
Freight factoring, also known as trucking factoring or transportation factoring, is an efficient way to get paid on the loads you run today instead of waiting 30, 60, or even 90 days to receive payment. With fast and reliable access to cashflow, it’s easier to keep your business moving forward between payouts.
But what is factoring in trucking exactly? Without freight factoring services, you’re at the mercy of slow-paying clients. The trucking industry standard is 40 to 50 days for processing full payouts—and the reality is that most companies can’t wait this long.
Waiting 30+ days to receive payment could be the difference between growing your business or passing up new opportunities. Constantly operating in a cash crunch makes it more difficult to pay for expenses such as truck repairs, fuel, insurance, and payroll. You can take charge of your company's finances and operations by teaming up with wholesale invoice factoring experts like REV Capital.
Learn more about invoice factoring with REV Capital.
Before trucking invoice factoring gained popularity, many trucking companies were stuck with two options: relying on a bank loan or waiting for funds to reach their account. While a bank loan may give access to funds sooner than waiting on payment from customers, the interest charges are a huge drawback.
First-hand experience is the best way to understand the benefits of freight factoring. By selling their invoices to a factor, trucking companies can quickly receive a significant portion of their invoice value in advance, typically within 24 hours. This immediate influx in cash helps cover essential expenses, ensuring smooth operations without the stress of waiting for customer payments.
The transportation industry is notorious for slow payments. Factoring services for trucking companies offer a solution by getting you paid fast. Let's break down the process into four simple steps:
Once you deliver your freight, obtain a signed bill of lading (BOL) from the shipper. This document acts as a receipt, proving the pick-up, condition, and destination of the goods. It's crucial for both you and the trucking factoring company.
With your invoice and signed BOL in hand, approach a factoring company with experience in the transportation industry, like REV Capital. They'll assess your documents and verify their legitimacy, ensuring your business qualifies for their freight factoring services.
Up to 98% of the freight invoice value is paid to you by the factoring company within a day, allowing you immediate access to funds. This helps cover your operating costs, fuel, and payroll, keeping your business running smoothly.
The truck factoring company takes on the responsibility of collecting the unpaid invoices in full from the shipper. Once paid, the factor will retain a small fee (1 to 3%) and remit the remaining balance to you.
Factoring in the trucking industry can be narrowed down to two subtypes: non-recourse factoring and recourse factoring.
Non-recourse factoring means that the factoring company will not collect from you if your customer fails to pay them back. While this sounds like a benefit to you, it’s often nothing more than how the offer is presented. Simply put, non-recourse factoring is true in only the rarest of cases. For example, if a customer files for bankruptcy between the time you submit an invoice and when they’re due to pay the factoring company. This option usually comes with higher fees due to the added risk the factor takes on.
Factoring companies don’t stay in business by offering non-recourse arrangements. Every company will recourse you if your customer neglects to pay or pays them later than your agreed-upon terms.
Recourse factoring, on the other hand, requires the trucking company to repay the advance if the customer fails to pay, typically resulting in a lower factoring fee. Choosing between the two depends on a company’s risk tolerance and financial strategy.
If your trucking company runs on tight margins, you’re not alone. Waiting for invoices to clear can cripple your cashflow, making it difficult to stay on top of expenses, let alone pursue new business opportunities. Freight factoring for trucking businesses bridges this gap by providing immediate access to capital. This lets you pay bills, cover operating costs, invest in maintenance, or even take on a new load—all without waiting for customer payments.
Financial stability is crucial for any trucking business to be successful. Freight factoring offers a reliable solution by converting accounts receivable into immediate cash. This consistent influx of funds helps businesses manage their finances more effectively, reducing the need for high-interest loans or lines of credit.
With improved cashflow through trucking invoice factoring, companies can take on more business without worrying about payment delays. Same-day funding means owner-operators can cover the upfront costs of new contracts, such as hiring additional drivers, increasing fuel purchases, and performing necessary vehicle maintenance. This agility allows trucking companies to accept more lucrative jobs and expand their customer base.
→ Related resource: 7 Tips To Grow Your Business
Managing accounts receivable, chasing payments, and maintaining detailed financial records can take a significant toll on your administrative resources. When outsourcing these tasks, the factoring company for trucking professionals handles the entire collections process, allowing you to focus on what you do best—hauling loads and delivering exceptional service. This helps streamline operations, reduce administrative overhead, and dedicate more resources to core business activities that drive growth.
Keeping your rig on the road requires consistent cashflow, but slow-paying customers can leave you waiting for weeks with traditional financing options. Freight bill factoring offers a compelling alternative, but how does it compare to other methods?
Bank loans provide a lump sum of money that must be repaid with interest over a fixed period. They also can take weeks for approval and often require a strong credit history and substantial collateral. In contrast, freight bill factoring offers a much faster turnaround without adding debt to your balance sheet. The amount you receive is based on the value of invoices rather than credit history, making it more accessible for businesses with less-than-perfect credit or limited collateral.
→ Related resource: 5 Ways Invoice Factoring is Different Than a Loan
Factoring also offers greater control over your finances compared to lines of credit. Lines of credit come with set limits and repayment schedules, which can be restrictive. They also involve high interest rates and fees. With freight factoring for trucking professionals, you have the flexibility to choose which invoices to sell, allowing you to access funds as needed and manage your cashflow strategically.
Merchant cash advances (MCA) provide a lump sum in exchange for a percentage of future sales, repaid daily or weekly from credit card transactions. While MCAs offer quick access to funds, they also come with hidden fees and higher interest rates, often leading to significant costs. This can be risky, especially for trucking companies with fluctuating income. Truck factoring, on the other hand, is not a loan, with fees typically lower than MCAs. Factoring payments align with customer payments, reducing financial strain and providing a more predictable cashflow for trucking operations.
→ Related resource: How to Protect Your Business from Rising Interest Rates
Freight invoice factoring companies aren't in the business of handouts—they assess risk before extending their services. Understanding their evaluation process will help you showcase your business's strengths and secure the best options available. Here's a glimpse of three key factors they consider:
Selecting a fair and reputable company that provides reliable freight factoring services is critical for the financial health and growth of your trucking business. A solid partnership is built on several key factors; here are some things to keep in mind before entering into a factoring agreement.
A transparent fee structure is essential when choosing a freight factoring company. Ensure the company clearly outlines all fees, including factoring rates, processing charges, and any additional costs. Hidden fees, termination fees, and origination fees can erode your profits, so transparency is key to understanding the true cost of the service.
The more freight invoices you submit, the more difficult it can become to track them. 24/7 monitoring is a valuable feature offered by top freight factoring companies. It provides round-the-clock access to your account information, enabling you to track payments, manage invoices, and monitor your cashflow at any time. Look for a company that has an easy-to-access portal so you can track everything from collection notes to purchase reports to statements.
Choosing a freight factoring company with a reputation for exceptional customer service is crucial in any long-term partnership. Look for a factoring company with strong customer testimonials and high ratings for reliability, responsiveness, and support. Excellent customer service ensures that any issues or questions are promptly addressed, providing peace of mind and allowing you to focus on growing your trucking business with confidence.
While specific requirements can vary between transport factoring companies, there is a general set of criteria that must be met before an agreement is signed. Trucking companies should be in a good position to qualify if they tick these boxes:
Most freight factoring companies understand the importance of a smooth application process. They want to make it easy for you to get started and access the benefits of consistent cashflow. Here's what you'll likely need to provide to initiate the factoring process:
With all this in hand, you can confidently complete a formal application. The more information you supply the easier it is for a freight factoring company to determine if you’re a good fit.
From there, a thorough evaluation will commence to determine approval. If approved, the trucking business and freight factoring company will establish an agreement, setting out the terms, fees, and structure of the partnership.
→ Related resource: Experts Answer: Is Invoice Factoring Right For Your Business?
Factoring companies exist to help owner-operators of businesses get paid the money they’ve rightfully earned. In an industry like trucking, immediate access to funding is essential to keep vehicles on the road—that’s why partnering with the best factoring companies that have your best interests in mind is key.
REV Capital’s mission is to reinvent invoice factoring. We specialize in providing recourse factoring for truckers and freight companies across North America. We’re also proud to offer fuel card programs and fuel discounts, reliable credit checks, and round-the-clock access to our client portal so you always know where your money is.
We’re here to simplify the truck factoring process. Reach out to our team today to find out how we can help your business grow!
%201.svg)
