Factoring Freight and Fuel Card Discounts for Trucking
Solid Cash Flow
All companies need solid cash flow in order to operate smoothly, and the trucking industry is no different. 18 wheelers can hold up to 300 gallons of diesel fuel, and at today's prices, it could cost almost $1000 to fill the tank. That's a lot of cash, and since freight shippers or brokers may not pay invoices for 30 or even 60 days, many individual owner-operators and even large trucking companies need receivable financing. Since banks are lately notorious for their over-stringent lending requirements, truckers may need to look to factoring freight in order to get the cash they need.
Factors buy your invoices and advance you money almost instantly. In the trucking business,
the factor can even download the money to a widely accepted fuel card and this eliminates out of pocket fuel expenses. Many times, fuel cards come with special discount plans for diesel and other necessities, so in addition to readily available cash, the cards can also provide you with savings and convenience.
When you contract with a factor, they'll explain how much money you'll be paid per invoice,
when you'll receive it, and what your future obligations are. Usually, the factor will pay you 80 to 90 percent of the invoice amount. The rest, minus only pennies on the dollar, will be paid to you as soon as your customer pays their invoice. Factoring is not traditional bank financing, so there is no interest involved. You get your money quickly, and the burden is on the factor to collect the actual amount of the invoice.
Even if you've declared bankruptcy, a factor may be able to help you. Although their underwriting departments do look at your financial health and the worthiness of your company, they are more concerned with the integrity of your billing system and the strength of your customer accounts. Even if you've had financial difficulties, if the future looks bright, you'll probably be able to use factoring.
Long Term Commitments and Fees
While some factors require long-term commitments, the better ones do not. Although there may be some minor bookkeeping fees involved, these should be minimal.
If you’re worried that a factoring agreement will impact your company's credit rating, you should know that it’s not usually an issue. Invoice factoring companies typically do not report to credit bureaus and the receivable financing you'll get from a factor does not usually have an impact on your ability to get traditional loans. In addition, a good relationship with a factor could serve as a form of financial reference for third parties.
While the corner hamburger stand may not need receivable financing, if you're in the trucking business, you probably do. Learn firsthand how factoring can help your business, contact us today.