How Trucking Companies Depend on Truck Factoring to Grow

When it comes to running your trucking or third-party logistics (3PL) business, you have to handle specific tasks on a regular basis. From taking care of your fleet to adhering to certain guidelines, these requirements are often unique to the industry and not seen in other sectors.

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But perhaps nothing comes off as more of a challenge than the management of your revenues. With each bill of lading (BOL) taking 30-90 days to get fulfilled, you need to grapple with ongoing expenses and haphazard payment timelines to keep the lights on. If you want to grow your business, the management of your cash flow poses a greater difficulty according to CartonCloud.

That’s why many freight and 3PL businesses turn to a trucking factoring company to cater to these needs. These factoring firms not only offer immediate fulfillment against unpaid invoices, but also deliver it without costing a fortune. As a result, they have become a primary solution for trucking companies to maintain and grow their business.

To see how freight invoice factoring works and how it can help in scaling your operations, here’s a lowdown on this mechanism and its overall benefits.

What Does a Trucking Factoring Company Do?

A trucking or freight factoring company operates as a specialized provider that purchases pending invoices from trucking or freight businesses. In return for the purchase of these BOLs, factoring firms offer cash payments to the trucking business in question.

When a factoring firm purchases an invoice, it typically pays the trucking or freight business around 80-90 percent of their total invoice amount upfront. The rest of the amount is paid when the end client settles the BOL in full by its due date. That is also when the factoring company recovers its investment and makes a profit through a preset or flat service fee.

Even if an invoice’s actual due date is weeks or months ahead, a factoring company can purchase it for cash. This way, trucking businesses can swiftly get paid to deliver their loads despite the 1-3 month fulfillment timeline associated with typical BOLs.

As a result, factoring companies offer trucking businesses a way to encash pending invoices before the actual client pays them. This lets trucking businesses find a way to cover their expenses and fulfill their growth plans without lengthy timelines.

This invoice factoring model is widely available and easily accessible. Due to this reason, it has become one of the primary ways for trucking companies to manage their cash flow and scale their operations.

What Type of Trucking Operations Can Benefit From Invoice Factoring?

No matter if you move oversized loads or tanker hauls, your trucking business can benefit from the offerings of a trucking factoring company. You need to find a provider who is reliable and swift with their operations. From there, you can easily factor your invoices without any problems.

It’s because freight factoring companies aren’t limited to a certain type of load or trucking operation. Most of these factoring firms offer their services to a wide variety of freight businesses. As long as you have a bonafide trucking business, you can factor in your pending BOLs through an invoice factoring company and grow your operations as a result.

This particular flexibility also applies to startups and established businesses alike. No matter if you are trying to factor unpaid invoices for a new trucking operation or a seasoned freight business, the right invoicing company can fulfill your needs. While more unique businesses often need to fulfill certain requirements, it’s common for invoice companies to vouch for these entities.

This acceptability of a large scale of operations is a big reason why trucking businesses rely upon factoring companies to support and scale their operations. As long as you reach out to the right factoring firm, you can also reap this model’s benefits. You just need to make sure that your business meets certain factoring companies’ requirements to qualify for these services.

Why is Invoice Factoring So Popular Among Trucking Businesses?

The biggest driver behind the popularity of invoice factoring is the shortened duration of payment fulfillment. But even at being such a significant advantage, it is just the surface level benefit of turning to a trucking factoring company.

Whenever you are running a trucking business, you have a plethora of operational requirements to meet on a consistent basis. Whether you are trying to maintain your fleet for regulatory compliance or looking to move bigger loads than usual, you need to have cash on hand to cater to these actions.

By cutting down the payment timeline, you can fulfill all of these needs to keep your trucking operation alive and well. This directly helps you grow your business and helps you achieve future goals of expansion.

Manage Operational Expenses in a Stress-Free Way

If your BOLs remain pending even after delivering repeated loads, the wait between your delivery date and your due date can often hit your company accounts. Even if you have the means to fulfill operational expenses to an extent, digging into your savings can be quite risky. In some cases, it can empty your coffers to the point where you are unable to foot your regular bills. 

That’s where invoice factoring can help. By turning to this model, you can easily get paid for the work you have done without waiting for a few weeks or months for it. This helps you cover your spending directly through your work and ensures that you don’t run into the risks of depleting your accounts. This assurance also helps you follow through on your plans of future growth.

Stay Up to Date With Regulatory Inspections

When you operate commercial vehicles as a part of a trucking business, you need to adhere to the inspection guidelines set by the Department of Transportation (DOT). Among other requirements, these regulations ask for your vehicles to be inspected by third-party inspectors to make sure they are running without any issues. Similar to other activities, these inspections don’t come for free. 

Meeting these expenses can be difficult if you are waiting for your invoices to get paid. By looking into a trucking factoring company, you can sell these BOLs and get cash payments to keep your critical inspections in check. This makes your operations compliant with all guidelines and ensures that your business steers clear of any penalties as you take on more loads.

Maintain and Repair Your Fleet Without Delay

Apart from inspections for regulatory compliance, every commercial fleet requires ongoing maintenance and repairs. This routine not only makes vehicles safer to drive, but also keeps the trucking business safe from bearing huge losses of equipment failure. That is why, maintenance and repair activities are critical to every trucking business. But keeping in line with these measures comes with a significant cost.

If you are facing cash flow problems while taking care of your vehicles, selling your unpaid invoices can help resolve them right away. This ensures that you are able to manage your vehicle maintenance programs without worrying about footing the bill for them. As a result, you can continue running your operations like a well-oiled machine, which also helps you scale them without a second thought.

Get Your Payroll in Motion Without Problems

A well-managed trucking business goes well beyond the maintenance of its fleet. It also takes care of the very people who operate these vehicles on a daily basis. Due to this reason, it’s critical that you always pay attention to swift and stress-free delivery of employee payroll and benefits at all costs. With that being said, it can get trickier when you have pending invoices to boot. 

By reaching out to a trucking factoring company, you can ensure that you don’t cause any delays in managing the payroll and benefits for your employees. This makes for a happy team all around your trucking operation, and ensures that you don’t have to face critical issues such as a high turnover. This also feeds into seamless growth for your business.

Expand Your Operations and Capabilities

No matter the freight subsector you work in, your trucking business always has some potential for further growth. Expanding your operations allows you to get larger loads and fulfill more significant deliveries, which ensures that you can scale your business in a tangible way. Apart from tending to your business’ ongoing needs, this is one of the biggest reasons why you need substantial cash flow at all times.

Whether you are anticipating a big order or want to invest in expansion activities right after delivering a load, you can look into selling your invoices. This makes sure that you can fulfill the investment requirements of your ongoing growth without any problems.

Due to these reasons, factoring invoices has become the go-to solution for many trucking businesses who want to operate and scale their operations in an optimal way. By finding the right factoring firm, you can also benefit from this model and see your business thrive consistently.

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