Some contract truckers have long-term contracts with brokers and shippers. Instead of having one job and moving on, they might transport goods for a company for months or years. Contract drivers are independent contractors, so they pay their own business taxes, maintain their own trucks and trailers, and operate their own trucking company.
At the same time, contract drivers have the freedom to set their own schedules, which makes it appealing. You might be an early bird and want to be back home in time for your children to get home from school. You might prefer to be on the road for as long as possible, so long-haul routes are ideal for you. When you work for yourself, you choose what works best. It does have downsides, too.
One of the downsides to a contract driving job is that you might not have a lot of time for office work like invoicing. That means weeks pass without any pay. Until you send out invoices and your clients pay them, you’re living off your savings. If you’re on the road and need money for fuel, it’s not ideal to suddenly run short. Freight factoring can help you maintain a strong cash flow.
The Difficulty Maintaining a Strong Cash Flow With Long-Term Jobs
We touched upon how hard it is to invoice your clients when you’re on the road. When you’re home and have time off, the last thing you want to do is spend it on paperwork. It may be something you have to do.
Most truckers pull over in a parking lot or away from the loading dock and take 15 to 20 minutes to invoice a client after dropping off a load. That’s the best practice, but it’s 20 minutes of your day.
You have a federal limit of 11 hours of driving, and a 30-minute break is required after driving for 8 consecutive hours. If you’re taking that 30-minute break and doing your invoices, you need to rush your meal, which isn’t good for your body. Otherwise, you’re taking up time when you could be taking on another client, especially if you aren’t a long-haul driver.
Even if you invoice regularly, most clients take upwards of a month to pay. Some will collect your invoices for 30 days and pay in one lump sum. Try keeping your business going for a full month when you have no payments coming in. It’s hard.
Many truckers rely on credit cards to get by, but the interest rate on credit cards is astronomical. Per Lending Tree, the average business credit card interest rate in February 2025 is 24.21%. You’re losing almost 25% in interest if you don’t pay your total amount due before the due date, which means less in revenues.
If you pay a bill late, you’re also adding late fees to the picture. Late payments impact your credit score, which means things like insurance and interest rates increase. Plus, brokers and shippers check your credit rating before hiring you, so you could lose out on valuable job opportunities.
What happens if your truck breaks down and needs repairs? Are you willing to wait until your client pays you before you can afford the repair? It’s a situation that can bankrupt a contract truck driver’s business.
Freight Factoring and Contract Trucking Arrangements
How does freight factoring help you avoid those problems? What is your business credit card’s APR? How much of a balance do you carry from one month to the next? That balance is accruing interest charges.
Now, consider freight factoring. There is a fee for this service. It’s usually below 5%, which is substantially lower than credit card interest. For that fee, you receive payments instantly.
Suppose you drop off the skids you were hauling at your client’s designated loading dock. You send the bill of lading to the freight factoring company using the app that makes the process simple. If it’s before the daily deadline, the money you’re owed arrives that same day. No more waiting days, weeks, or months to get paid, which is important when you’re on the road and don’t have time to chase payments.
Fast payments are just part of the benefit. You also enjoy services that slash your monthly expenses. One of the biggest involves discounted prices for diesel or gas. If you’re saving up to 90 cents per gallon on every fill-up, it adds up quickly. That money helps offset the low factoring fee you’re paying.
Another area where freight factoring helps is with a sudden business closure. You delivered merchandise for a broker and have been waiting for payment all month. You still haven’t been paid and see a news article that the company went out of business suddenly. If you’re going to get paid, it’s going to take a fight in bankruptcy court. Do you have time for that?
If you have a non-recourse factoring arrangement, the freight factoring company assumes the risk. They have to swallow the loss. If you have a recourse arrangement, you’d be responsible for repaying the money you received, so you must consider the pros and cons of each. Non-recourse fees are higher, but it’s a handy form of insurance against bankruptcies and sudden closures.
Questions to Ask Before Choosing a Freight Factoring Provider
Choosing the first freight factoring company you come across isn’t the best way to find the right partner. Build a list of finalists by asking questions that help you determine the best match to your needs. Here are some of the important freight factoring questions to ask.
- What are your factoring fees for recourse vs. non-recourse arrangements? What about bank fees or other possible hidden fees?
- If I don’t run as many loads as usual, am I going to be penalized?
- Am I locked into a contract with you for a set number of months, years, etc., or can I cancel without penalty?
- Do you have additional services like insurance discounts, fuel discounts, or free credit checks?
- Do I have to invoice all my clients through your firm or can I pick and choose?
- How quickly do I get paid? Are same-day payments possible? What are the rules for same-day payments?
TBS Factoring provides same-day payments, which means you have a strong cash flow throughout the week. Make sure you ask us and other factoring companies you’re considering to guide your final decision regarding which company best fits your needs. With our low factoring rates, free business credit checks, and fuel discounts, we know we can help you build and maintain a strong cash flow.