The trucking industry is the backbone of the nation’s economy, generating hundreds of billions of dollars in annual revenue. $700 billion, to be exact. Trucking moves 71 percent of all freight in America, and accounts for 6 percent of all the full-time jobs in the country. In 2017 alone, trucks moved 10.8 billion tons of freight across the country. It is safe to say trucking companies serve as a lifeline for a very long list of producers and consumers.
Even so, like any industry, trucking companies face their own unique set of challenges. Cash flow can be a cause of concern, since transportation companies often struggle with long wait times for payment. Meanwhile, there are still recurring expenses like gas and payroll to cover. Finding and retaining quality drivers can also be a challenge that hinders growth.
For your established company to continue to grow or to start a successful trucking business, strong cash flow is critical. Invoice factoring, also known as transportation factoring or freight factoring, has become a go-to cash solution for many transportation companies. Why are so many savvy business owners using this financing tool, and how can it help you grow your trucking business?
Here are just a few reasons why more and more companies are choosing factoring services over traditional financing options:
Ideal solution for new businesses
Starting a new trucking business requires quite a bit of cash upfront to meet payroll and pay for fuel and other expenses to deliver a load – all before your business has been paid. However, new trucking companies typically do not have the financial or credit history necessary to qualify for a bank loan. The qualification criterion for invoice factoring, on the other hand, is largely based on the creditworthiness of your customers. Factoring your business’ invoices allows you to avoid bank loans and lengthy, fruitless application processes altogether and gain quick access to your hard-earned money.
Provides quick cash to manage demand
A rapidly expanding businesses faces a unique set of challenges. For example, when business picks up, you will need extra capital to hire more drivers and keep up with demand. Factoring your outstanding invoices can place cash in your business’ bank account in as little as 24 hours, when you need it the most. Instead of waiting 30, 60, or even 90 days to receive payment from customers, you can use the quick capital freight factoring provides to pay your drivers, add to your fleet and manage growth.
Allows you to avoid taking on debt
Contrary to popular belief, starting and growing a successful business does not mean you have to go into debt. When you choose to partner with a factoring company, you are selling your business’ accounts receivable at a discount in exchange for an advance of funds – it is not a loan. Once the factor receives payment from your customer, the remaining balance is then forwarded to you, minus a small factoring fee. Your business gains access to its hard-earned money, without taking on additional debt.
Gives you the funds needed to expand
At times, it can be difficult to maintain enough cash to cover day-to-day operations, let alone take on more jobs and grow your freight business. Expanding your trucking company requires extra capital to hire more workers, pay for gas, purchase rigs and cover repairs. Factoring helps you free up cash sitting in accounts receivable, giving you the steady source of working capital your business needs to complete each job, accept new orders and continue to expand your business.
Saves time and resources tracking invoices
Many invoice factoring companies also offer assistance with key back-office tasks like collections, monitoring payment progress, credit reporting and more. This support not only simplifies the task of tracking invoices and collecting payment, but also reduces the number of staff and other resources needed to manage records. The factoring company provides the cash your growing business needs in advance and tracks your invoices for you. Meanwhile, you can devote more of your time and resources to building strong relationships with your customers and accepting new business.
Offers the ultimate flexibility
Unlike a bank loan or other traditional funding options, there is no maximum financing amount with invoice factoring. The amount available to your trucking company is only limited by the number of eligible invoices your business has to factor. In fact, factoring is the only source of financing that grows with your business. As your receivables grow, so does your business’ line of credit. You also get to choose when you would like to use factoring services; use factoring when it is most convenient for you, and when your business needs it most.
Does you transportation company need extra working capital to cover day-to-day expenses, add to its fleet and take on new business? Could your business benefit from help with managing receivables? If so, consider the advantages of using invoice factoring. Secure fast funds while avoiding debt, and free up your time to focus on new sales and expanding your business.
Are you interested in learning more about how invoice factoring works and how it can help your transportation company grow? Contact our cash flow experts at Bold Business Capital to get started.
