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.

  • Credit checks: A factor will provide free credit checks on the client’s customers to ensure they are in good standing and complete the payment at the end of the payment term.

  • Fuel cards: Most factoring companies will provide clients with a free fuel card. The cards will have discounts for truck drivers to save money across the nation, and most of the time, driver’s funds can be advances directly onto the card.

  • Dispatching: Finding the best loads is important for business success. Often, freight factoring companies will provide dispatching help as part of their services. Using dispatchers is less time-consuming than finding freight yourself through a load board. Working with a dispatch consultant will help improve your cash flow by providing you with the most profitable loads.

  • Insurance and compliance: A trucking business must stay compliant to avoid fines and risk their trucking authority going inactive. The best factoring companies will have partners available in compliance to make sure you have everything in order. They will also have insurance partners to help you find the best rates.

Quick pays are another way to improve your cash flow by receiving immediate cash for your unpaid invoices. However, using quick pays limits you to only working with shippers or brokers that offer them. Sometimes that means running a load for less than you usually would, so you don’t need to wait to get paid.

For more information on how you can improve your trucking company’s cash flow, get in touch with us today here.