How long does it take before you get paid? If you’re waiting 30, 60, or even 90 days, how easily can you keep up with your expenses like truck loans, utilities, and rent? When a client pays even a few days late, keeping up with your own bills is hard.
Between 2020 and 2022, around 195,000 new trucking companies entered the market. Seven out of 10 of those were single trucks. A new problem emerged. In 2022, the cost of running a trucking company increased by 51%. Rising prices for diesel, insurance, and even permits and fees made it hard for independent truckers to stay afloat. Getting paid late could break your company.
There’s a better way. Let a company purchase your invoices from you. It’s the best way to get paid fast and have a constant cash flow coming in.
Introducing Freight Factoring and Instant Payments
Freight factoring is a service where you sell your invoices and get paid immediately instead of having to wait 30, 60, or 90 days. Instead of having to float bills for at least one month, you have the money you need for a strong cash flow. You pay your bills on time and have the money you need to keep your fuel tank full.
When you deliver a load, you have the signed bill of lading and return it to your office to generate an invoice. That invoice is mailed, faxed, or emailed to your client, and they pay it when they’re ready. Ideally, they’ll pay you as soon as they get the invoice, but some clients will wait until the due date, which could be a month from now.
Instead of waiting, you take that bill of lading and submit it through an app to a freight factoring company. You also need to include a rate confirmation sheet and possibly documents like retention tickets. The factor generates the invoice for you and sends that to the client. The amount you’re owed is added to your account after fees are deducted. You can then transfer those funds to your bank or use them for expenses like fuel.
Fees vary depending on the number of trucks you have, how much work you do each month, and your credit rating. Suppose you have a factoring fee of 3% and have just delivered a load that will pay $10,000. You’d pay a $300 fee and get the rest paid early. There can be some variants to this.
Some factoring arrangements provide you with a certain percentage to start, and you get the balance when the client pays the invoice. Suppose the arrangement is that you get 90% now. You’d get 90% of the $9,700 now. When they pay, you get the remaining 10%.
What happens if they don’t pay? There are two options at TBS. Non-recourse factoring occurs when you’re protected if your client can’t pay due to funding issues or bankruptcy. The fees are higher, but it’s a level of protection.
The other option is recourse factoring. If your client doesn’t pay, you have to repay the amount you received from TBS. For an independent trucker, that can be difficult to manage. That’s why it’s recommended that you look at non-recourse factoring.
People often think if they factor their invoices, they have to factor ALL of their invoices. That’s not the case. You’re welcome to pick and choose the companies you want to factor and the ones you don’t.
Suppose you have a client that’s paid you on time for years. You know they’ll pay, so you shouldn’t factor those invoices. Save the money and continue as you’ve been doing. But, you should factor invoices for new companies that you’ve never worked with. If you see work that is at a good rate and near your normal route, take the work without having to worry about whether you’ll be paid or not.
Other Benefits to Consider From a Freight Factoring Expert
In addition to fast payments, a freight factoring arrangement also makes it easier to run your business. With a TBS: Get Paid® App, you benefit from technology that makes it easy to track incoming payments, the pending ones, and a GPS-based verification tool to make it easy to record when you’ve picked up and dropped off a load.
Our freight factoring arrangements provide funding every day until 11 p.m. Central Time all week. If you request a payment after 11 p.m., it will be processed at 6 a.m. the next morning. ACH and wire payments are processed following your bank’s timelines. In many situations, you never have to wait more than a day to have the funds available.
You can keep track of invoices, upload them to your bookkeeping software, and check your current balances from this app. It makes bookkeeping much easier to manage, which frees up your time for finding more work and driving.
Running credit checks on potential clients is important because it allows you to check someone’s credit history before you agree to work for them. If you see a broker or shipper has a long history of paying months past due or owes many companies money and has yet to pay, you’ll know to move on. It’s not worth the risk.
DOT compliance isn’t the easiest process. TBS can help you with MC/USDOT Number and BOC-3 without a processing fee or annual membership. You’d simply cover the cost of the registration fees and enjoy our expertise in completing the proper forms. If you need help preparing for an audit or figuring out truck permits for crossing state lines, we’re happy to guide you.
When we help you with compliance, we have a DIY package or a full-service option. Pick the one that best fits your time and needs. Our company has more than 50 years of experience in the trucking industry, so you can rely on us to know everything there is about helping your trucking company grow and thrive.
Finally, when you partner with TBS to factor in your invoices, you enjoy a fuel discount card. Saving money on gas or diesel is one of the smartest ways to keep your business costs to a minimum. That’s key to thriving in a tough economy.
Reach us online to learn more. There are no sign-up fees, and you don’t have to meet volume requirements. We also do not require you to have been in business for years.