Freight factoring is a simple financing tool that allows companies to finance their outstanding invoices. It works by selling your accounts receivable invoices (or accounts receivable) to a factor in exchange for immediate cash funding. Freight factoring is particularly helpful for trucking companies that experience cash flow problems due to high operating costs. Often these companies simply cannot afford to wait 30 to 60 to 90 days for clients to pay large outstanding bills. Freight factoring improves their otherwise static cash flow and provides funds allowing trucking companies to make new investments and to pay for business costs.
Unlike most financing options, factoring can be provided very quickly, making it an attractive financial strategy to companies that need funding right away. When it comes time to choose an invoice factor to meet your needs, make sure you choose the right company who offers you the right package. Accutrac Capital is a factor exclusive to the trucking business, and their rates are the lowest in the industry. With a recourse period of 90 days and high advance rates as well as same-day funding, they provide free online credit search tools which help protect you as a carrier, from bad debt.
As soon as a trucking company decides to capitalize on affordable freight factoring to improve its cash flow, the next question becomes whether to use recourse or non-recourse factoring. At first blush, non-recourse factoring seems to offer the attractive benefit of zero liability — which is to say, if the invoicing client can’t pay, you, as the trucking company, are off the hook.
In reality, this is not the case at all. It is often very clearly articulated in the actual terms of a non-recourse contract that protection against financial loss is valid in only one particular circumstance – if the invoicing client cannot pay because of insolvency. If the customer cannot pay the invoice for any other reason besides bankruptcy, then you, the carrier, are obligated to pay not only the advanced funds back to the factoring company but additional costs as well.
This is why recourse factoring is often the more popular pursuit for trucking companies. It is easily the most cost-effective option – especially compared to non-recourse factoring.
- Higher Freight Bill Collections Success Rate:The highly professional staff of a reputable factoring company has extensive experience in courteously pursuing collections. Freight factoring companies boast a high success rate on freight bill collections.
- Recourse Factoring costs much less overall: Recourse Factoring fees are usually 30% to 35% cheaper than Non-Recourse fees because the credit risk stays with you, the carrier.
- Fewer Credit Restrictions: Recourse factoring provides fewer credit restrictions than Non-Recourse factoring, which in turn allows the carrier to focus on other areas such as expansion.
Trucking and transportation are both capital intense industries, and they require constant access to working cash flow in order to maintain growth and sustain ongoing operations. As a business owner, your capacity to effectively insure regular dependable cash flow has a massive impact on how well your trucking company does today and into the future.