Factoring is one very appealing option in trucking industry financing, which is made available by alternative lenders. Any trucking company which is plagued by slow-paying customers who have already been invoiced, can benefit by factoring.
How factoring works for trucking companies
After you have transported freight for a number of customers in any given month, and have invoiced them for your services, you would generally have to wait until customers pay those invoices before receiving cash. In factoring, an alternative lender would purchase those invoices from you at an amount equal to approximately 80% of their face value. At that point, the factoring company would then become responsible for collecting the amounts of those invoices from your customers. After having collected the invoice amounts from your customers, the factoring company would then remit the remaining 20% to your trucking company, after subtracting out its factoring fee.
Advantages of factoring
There are number of advantages to this form of trucking industry financing, the most obvious of which is that it puts cash in your hands immediately, rather than having to wait for customers to pay up on invoices. Since you’re getting the cash in exchange for invoices that you own, there is no loan involved in acquiring the upfront money, so you don’t have anything to pay back, and there is no additional expense to add to your monthly budget. In addition, it’s also fairly easy to qualify for trucking factoring, since your own credit history is not really a huge factor in approval. A lender will always be much more interested in how promptly your customers pay their invoices, than in your company’s credit history.
Will factoring work for your trucking business?
If you think factoring might be a good fit for your trucking business, we’d like to hear from you. Contact us at Goldendale Capital, and we’ll be glad to answer any questions you may have about trucking industry financing, and perhaps even work toward a financing agreement with you.