There are so many factoring companies offering financial services for trucking companies that is has made it more difficult to determine what attributes you should consider when it comes time to select a factoring company for your trucking business.
In order to determine if a factoring company is the right fit for your trucking company, we will have to look back at how the trucking industry has evolved along with the invoice factoring industry. If you have been around the transportation and trucking industry for a while, you may recall the days when everything was done by phone, beeper and fax if you were lucky to have one. In those days there was no email, cell phones, GPS, fuel cards and many other beneficial devices and services that are here today to help trucking companies succeed. All businesses expand and invest as they grow and look for more efficient methods while keeping cost down and production high.
Cash flow shortages in the trucking industry still exist today as much as it did back then. Even with all these gadgets and digital enhancing devices, freight bills still get paid in a slow manner causing extreme cash flow issues for trucking companies.
Traditionally trucking companies would get a dispatched order by Fax or a phone call from a shipper, but with today’s trucking market it will be more likely an email from a freight broker working on behalf of a shipper or a notification from an online Trucking Load Board Service.
The loads being dispatched to trucking companies are moving on a fast pace but incredibly the payment of invoices is slower today than it was 10 years ago. Due to the slow payments from freight brokers and shippers, trucking companies have had to search for trucking invoice factoring companies that specialize in funding invoices on credit terms. An invoice for a completed load that has been accepted by the client is an immediate business asset for the trucking company that can be pledged as collateral for funding. The funding is usually done by the factoring company purchasing the invoice from the trucking company at a discount, averaging anywhere from 1.5% to 3% depending on the sales volume and advance rate.
Before the digital age became popular in the trucking and factoring industry, the funding process was very slow and involved a lot of paperwork, mailing, and phone call verifications. A trucking company was required to submit ORIGINAL paper work for the load transaction. This involved a lot of time and cost for both the trucking and factoring company. Incredibly there are still factoring companies and trucking companies operating in the past, trucking companies are uninformed about the options now available to them and there are some factoring companies resisting change, lack financial resources to invest in the digital age and refuse to evolve.
A comparison of the process for factoring in the past and now present:
Present: Online access to credit approvals in seconds
Present: No Originals needed
Present: Fuel Cards and factoring companies changed everything
Choosing from the best factoring companies for your trucking company involves research in asking the right questions:
It is important to choose a factoring company that specializes in the trucking industry and that is shows continuing effort in keeping up to date in technology in order to help their clients.