While 2019 is shaping up to a be a rocky year economically, congress nevertheless hopes to generate a sustained period of business expansion in the U.S. and globally thanks in large part to its planned tax reforms. Many in the trucking industry hope these reforms will lead to a more manageable regulatory environment for transportation businesses and workers, but it remains to be seen.
Until the (unlikely) time that trucking ceases to be a finicky business, carriers will always rely on transportation factoring to help them grow sustainably. If you own a trucking business of any size, it’s essential that you familiarize yourself with the process and benefits.
Factoring is a financial exchange between a carrier and a factoring company that allows carriers to sell their accounts receivable at a discount for immediate up-front funding. Here’s how it works:
• Your trucks deliver their freight as per usual
• When you send an invoice to your customer, you also send a copy to your factoring partner along with other necessary delivery documentation
• The factoring company provides an advance of up to 97% of the value of the invoice (minus a nominal factoring fee that varies by plan) — stop by Accutrac Capital for more information on terms and read on below for specific plans
• When the factor collects the amount owing from your customer, the reserve amount is remitted to you
Transportation factoring has become a mainstream financial solution because it provides much-needed cash flow to trucking startups, businesses in transition or those experiencing a difficult year, companies going through a change of ownership, and businesses unable to qualify for a loan from a bank or other traditional lender. Consider some of the many benefits invoice factorings provides.
Painless application process
The application paperwork is very straightforward and carriers are often approved within days. Once approved, they can begin factoring their invoices same-day. Most reliable factoring companies also provide risk mitigation in the form of unlimited credit checks on prospective customers, helping you choose only the best contracts.
When operating a new business, it is difficult to establish credit. Transportation factoring provides your business the cash it needs even if you have limited or less-than-optimal credit history. While major banks and other financial institutions will require startups to have an impressive credit score (one they’ve not yet had the time to generate), a factoring company will advance money to startup trucking carriers based in part on the creditworthiness of their customers and not solely on the carrier itself.
Save time on collections
Factoring companies also help alleviate the stress and time sink associated with collections. The factoring company handles the general accounting responsibilities — including collections and A.R. management. By delegating these back-office tasks to your factoring company, you can focus on more immediate matters relating to the growth of your business.
When you choose a factoring company that specializes in the trucking industry such as Accutrac Capital, you will be working with a financial entity that deeply understands your business and can offer a number of transparent plans.
Consider their flat fee factoring plan, with rates beginning at just 1.59% of the invoice value. You might also consider the flex factoring option, at a generous 0.49% fee for up to 10 days. For larger operations, a factoring line of credit is often the best option, starting as low as 0.022% per day.
While you wait for congress and its tax reforms, don’t miss out on opportunities to grow your business in the meantime. Unpaid invoices shouldn’t negatively affect your company’s growth — so why not put them to work with transportation factoring?