If you’ve been driving a truck for years or are only a few months in, you know that consistent cash flow is critical in the success of your trucking company. Being on the road is tough as it is, so having the comfort of knowing that your trucking company is taken care of so you won’t miss a payment through freight factoring is important.

Working with a trucking factoring company provides you with that consistent cash flow you need to run a trucking company. Getting paid in a timely manner, having quick access to cash, and having the back office support to help with your business are all benefits of using freight factoring.

If you don’t already know, freight factoring is how you get cash for unpaid invoices. A freight factor will typically pay their clients within 24-hours once they have dropped a load and sent their bills in. Different factoring companies vary on their pay terms, but Porter Billing always pays you the same day. This method of receiving quick cash is beneficial for trucking company owners to pay all their expenses (insurance, truck payments, employees, overhead costs etc) without worrying.

Depending on your trucking company’s situation – how large your fleet is, your monthly volume, or how long you’ve been in business – freight factoring offers two different options: non-recourse factoring or recourse factoring.

What is non-recourse factoring?
A non-recourse factoring contractual agreement will protect you from clients that don’t pay on time, or at all. Your freight factoring company would incur the risk if the client doesn’t pay, and you will never be charged back for it.

Non-recourse factoring is beneficial for most trucking companies, especially if the company cannot afford to take on the risk of a client not paying or going out of business. The fee is often slightly higher, but worth it to avoid the risk of going out of business. With most non-recourse factoring agreements you also get additional services like back office assistance of billing, invoice handling, and collections included in the fee.

What is recourse factoring?
In a recourse factoring agreement, your trucking company is responsible for a situation where the shipper or broker doesn’t pay on time or at all. Since in this agreement you are sharing the risk, a recourse factoring fee is slightly lower.
The freight factoring company will provide credit checks on the shippers or brokers that you use to minimize the risk of working with debtors who fail to pay. With a recourse factoring agreement there is a portion of your funding held in a reserve account until your client pays the factoring company.

A recourse agreement is best for established trucking companies who have worked with their clients and know their pay terms. Also, it’s good for trucking businesses that don’t need back office assistance. However, billing can be included in the contract if needed.