Advantages of working with a factoring company
An invoice factoring company will usually pay its clients within 24 hours of them sending in their invoices, funding directly to their bank account. Fast payments improve the working capital of trucking companies. A trucking company’s cash flow will improve immediately due to the cash advances from a factoring company, and they’ll no longer have money tied up in slow-paying accounts receivables.
As well as eliminating the wait time to get paid, trucking factoring companies offer additional factoring services and advantages. There is no new debt or bank loans with freight factoring, so it doesn’t affect a company’s credit score. A factoring company will sometimes offer its client dispatching help and fuel cards. Some will also offer help with making sure their new trucking clients are compliant and have active insurance policies.
The best factoring companies will offer flexible contract options to work with. The flexible terms are beneficial for large and small businesses, depending on their company needs. The terms range from month-to-month contracts to long term contracts. The contracts are either non-recourse or recourse factoring agreements and offer back-office assistance like billing and invoicing.
How much do factoring companies charge?
This depends on a lot of criteria. Factoring companies make their money by charging clients a small percent per invoice they send in. Some companies charge a flat rate fee for all invoices, and some offer tiered rates depending on how quickly a customer pays. Some factoring companies will also set monthly minimums on how much their clients need to factor, affecting the rate charged. There also may be additional charges that cover the choice of ACH or wires.