In a volatile freight market, steady cash flow can make or break a trucking operation. That’s likely why freight factoring is surging in popularity. When trucking companies factor their invoices, the factoring company pays the invoice, essentially extending credit to the shipper and collecting the invoice directly. Trucking companies can then get paid immediately rather than waiting 30, 60, or even 90 days to get paid for an invoice. Getting paid instantly means steady cash flow, but factoring can help in other ways including reducing spending and increasing savings so trucking companies stay on top of their finances in a difficult market.
Here, we’ll go over some of the ways that trucking companies can save money to stay financially fit with freight factoring, even in hard times.
Freight Factoring Improves Cash Flow and Ups Savings
Factoring Gives You Access to Your Money Now
When the market is tough and loads are sparse, shippers and brokers tend to have the upper hand. They may even ask for more time to pay invoices, potentially reducing cash flow. With factoring, carriers can get paid up to 98% of their invoice value within 24 hours. This gives trucking companies the capital they need to cover things like fuel expenses, payroll, and necessary maintenance and repairs. Learn more about Express Freight Finance’s new DropPay service, where you can get paid the moment you drop a load. Fill out this form to learn more about DropPay.
It Reduces Bad Debt
When you use a factoring company, they assume much of the risk associated with debts. If a customer doesn’t pay, you may not be responsible for the unpaid invoice, particularly if you’re on a non-recourse factoring program. Not having that debt hanging over their head may give the trucking company more borrowing power should they need it and may help reduce interest rates offered when borrowing money. This could result in overall savings.
Freight Factoring May Improve Your Credit Score
Steady cash flow that results from freight factoring may help trucking companies improve their credit score by helping ensure bills get paid on time. A steady payment history helps boost credit scores, and no late payments can keep credit scores from taking a hit. A high credit score can improve the chances of getting financing down the road and improve the terms at which that financing is offered.
Freight Factoring Services May Offer Discounts on Other Services
On top of improving cash flow and all the positive aspects of that, freight factoring services may offer other types of discounts to help trucking companies save money and reduce their overhead. For example, Express Freight Finance offers a fuel card program that gives access to substantial fuel discounts at service stations across the US. Reach out to our team at 877.697.0605 to learn more.
In Conclusion
Freight factoring can be a valuable tool for trucking companies of all sizes. By improving cash flow, reducing bad debt, boosting credit scores, and offering other discounts, freight factoring companies can help trucking companies navigate turbulent markets by stabilizing their business, keeping money coming in, and reducing spend.
