You’re in an industry that is essential to so many aspects of commerce, construction, and disaster recovery. Truckers keep retailers stocked with goods and supplies getting to critical areas. However, trucking companies often have to wait a month, two months, or three months to get paid. It’s frustrating and even unfair to do work on time and then have to wait.
This is where freight factoring becomes a powerful tool for growth. When you work with freight factoring services, you enjoy fast payments, even getting paid the same day. Here’s all you need to know about same-day payments with a freight factoring partnership.
Think About All You Gain From Same-Day Payments
How difficult is it to keep up with your expenses? Like most trucking companies, you operate on tight margins with fluctuating gas and diesel costs, wages, benefits, taxes, licenses, permits, insurance, maintenance, loans, and so much more. When you’re waiting for clients to pay, you’re draining your savings, and that only makes things tighter. Until the pay arrives, it’s stressful. Same-day payments end that stress.
Cash is readily available, which makes it so much easier to keep up with all of your expenses. There are no more late fees, dings on your credit report from missed payments, and unhappy employees. Plus, failing to pay wages and payroll taxes puts you at risk of fines and penalties from the government. When cash is continually coming in, you avoid all of that.
Growing your business is easier to manage when you have a higher credit score. Brokers and shippers look at credit ratings before trusting a new trucking company. When you have a strong cash flow and positive credit rating, you attract new clients. That helps you grow. You also have money coming in to grow your fleet, which aids your growth.
When you factor your invoices, you get paid as soon as the same day you deliver the load. You no longer have to chase down clients who haven’t paid. And, you have less paperwork to do, as you don’t have to generate invoices, send them to your clients, and find time to go to a bank if they still pay by check.
Additional Services Add to the Benefits
Many same-day freight factoring arrangements offer additional services that are extremely beneficial. Because you get more than quick payments, you’ll find yourself saving in other areas.
Fuel discounts are one of the biggest reasons trucking companies turn to factoring. Imagine how much you’d save if you were getting upwards of 90 cents off per gallon. The TBS Comdata or EFS fuel cards award discounts of up to 90 cents, depending on the number of trucks in your fleet and the arrangement you enter.
Load-finding boards make it easier to look for new clients or jobs to fill gaps. You can search by area, rate, or other filters to find the perfect opportunities for your trucking company. And, most factoring companies provide business credit checks, so you can research a broker or shipper’s history of paying bills before you agree to work with them.
Other benefits offered by TBS Factoring include:
- Loyalty programs for savings on truck tires and parts for repairs.
- Partnerships with insurance companies for discounts.
- Assistance with DOT compliance and audit processes.
How Same-Day Freight Factoring Works
How does a same-day freight factoring arrangement work? Think of it as a cash advance. You deliver a load to a client and get paid a percentage then and there minus whatever factoring rate you’ve agreed to. For the cash advance, it’s usually 50% or more and the U.S. average freight factoring fee depends on the number of trucks in your fleet and the type of freight factoring arrangement you want, but it’s usually no higher than 5%.
The freight factoring company generates an invoice to send to your client and provides that information in your account. This makes it easy to upload information into your bookkeeping software. It also simplifies the work your office staff have to do each week.
Going back to the steps you follow to get paid the same day.
- Deliver a load and get the signed bill of lading.
- Take a photo of that bill of lading and send it to the factor through the app.
- Wait for approval, which involves the factoring company to ensure the client isn’t a credit risk by checking the business credit report.
- The cash advance, minus the factoring fee, is added to your fuel card for immediate use.
You get the cash, and the factoring company takes over the responsibility of collecting the money due. When your client pays, any residual balance is paid at that point.
For example, you have a 50% freight factoring arrangement with a 3% freight factoring fee. You agree to haul a load for a broker, and that load pays $20,000. You’d get $10,000 now, minus the 3% fee ($600), which means $9,400 is added to your fuel card for you to use on bills, fuel, and other expenses. When your client pays the bill, the remaining $10,000 is sent to you.
There are a couple of things that might delay your payment from arriving that day. If you submit the request after the daily deadline, you’ll get the payment the next day. Bank holidays can impact the timing of payments, too, but it’s always going to be the next business day.
You should pay attention to other fees that some freight factoring companies charge, such as failing to submit enough bills of lading in one month or penalties if your client pays late. Bank EFT fees may apply. You might also find a company that wants you to factor every load you haul and doesn’t allow the flexibility of choosing which jobs are factored and which are not. TBS Factoring lets you pick.
Tips for Choosing a Freight Factoring Company
Factoring companies vary, some companies factor invoices for all industries, and others that provide factoring services to specific industries. Freight factoring is only for the freight industry, which means you gain expertise from professionals who know the ins and outs of being a trucker and running a trucking company.
As you decide on the best same-day freight factoring partner, you should weigh these criteria.
What are the factoring rates?
Are there any hidden fees or upfront fees? If so, which company’s fees seem the most reasonable? Remember that the cheapest fee doesn’t always mean the best arrangement as you may become unable to continue invoicing companies you have a long relationship with and trust implicitly.
What is the advance rate?
Most companies offer 50% to as high as 100% for invoice factoring. What is the company’s offer, and are you okay with that percentage?
How long does it take the funds to arrive?
Same-day payments should arrive the same day if you make the deadline. If not, it should arrive the next day, preferably in the morning.
How are bills of lading submitted?
You should have an online platform or mobile app for quick submissions of bills of lading, tracking of where the request stands, and access to how much has been paid, is about to be paid, and what is still in the approval process.
What other benefits do I get?
Are you going to get fuel discounts? Does the company offer additional services like lower insurance rates through partnerships?
TBS Factoring offers some of the lowest rates in the industry with same-day payments and the option for non-recourse or recourse factoring. Reach us online to apply to start getting paid fast for the hard work you do.