It’s no secret in the trucking industry that cash flow problems occur. Although no business wants to run into this problem, it is normal, and trucking business owners should know how to prevent it.
Cash flow problems are common in the transportation industry because freight brokers or shippers can take anywhere from 30, 60, or even 90 days to get paid after hauling a load. This can be inconvenient in the long run as expenses don’t stop when a truck driver doesn’t get paid, and gaining access to working capital can be challenging.
Freight factoring is a great solution
One of the best solutions to cash flow issues is by factoring your freight bills. Invoice factoring helps truck drivers get paid in 24 hours without taking on any new debt. A trucking business sells its accounts receivable at a discount to a freight factoring company to receive immediate capital. The freight factor pays the invoices up-front and waits for the end of the customer’s payment term to receive payment.
Unlike a traditional bank loan, freight factoring incurs no new debt for a business. Getting approved is a lot easier and quicker with a freight factoring company. It’s also beneficial for new trucking companies as approval is based on a customer’s credit, not the trucking company itself. Since the customer is the one who is paying the factoring company, their credit is more important for approval purposes.
Additional benefits with freight factoring
Freight factoring improves cash flow with fast paying invoices and helps trucking businesses in other areas.