Trucking factoring, also known as freight factoring or invoice factoring, is the process of a freight factoring company buying the accounts receivables of a trucking business. A trucking factoring company provides truck drivers with a convenient, reliable, and fast source of getting paid on their unpaid invoices. Trucking companies get consistent cash flow when they work with a freight factor.
A trucking factoring company will typically pay its clients within 24 hours of them sending their freight bills in. This is extremely beneficial for trucking company owners as it usually takes freight brokers or shippers 30 to 90 days to pay for a hauled load. Freight factoring makes cash available so that trucking companies are never low on funds to pay for expenses.
How does truck factoring work?
The main benefit of factoring agreements are the fast payments. The truck factor will charge a factoring fee to advance trucking companies the amount of their invoice immediately. Depending on the factoring company, pay times may vary. The best factoring companies will pay their clients within 24 hours of sending in their invoices.
The trucking company books a load and gets a rate sheet. A BOL is signed at both locations to confirm pick-up and drop-off.
The BOL and rate sheet is then sent to the factoring company so the trucking company can get paid.
The trucking factor then advances the invoice amount minus the factoring fee with the agreed upon pay terms.
The freight broker or shipper then pays the factoring company 30 to 90 days later.
Other factoring services
On top of getting fast payments to have consistent cash flow for your trucking business, factoring companies also offer additional services. The best factors will provide its clients with a network of partners to grow their businesses. Porter’s clients get access to a database network of 250+ of the top freight brokers to work with to find the best paying loads. Clients also get a list of pre approved brokers and shippers, so that no one works with bad debtors who don’t pay. Most transportation factoring companies will also provide credit history checks on all brokers for free.