As winter arrives, some areas of the trucking industry pick up and others dwindle down. When you own a trucking company, seasonal slowdowns become costly if you haven’t planned ahead. The services offered by a freight factoring partner assure you have the support you need both financially and when it comes to business management.
It’s not just wintry roads that prove problematic for the trucking industry. Per the NOAA, 2023 was one of the warmest years on record and it was also one of the costliest due to storms and wildfires. It’s not any better in 2024. Hurricane Helene traveled more than 500 miles, destroying towns and cities in the process. Historic flooding took out roadways and bridges making travel around Florida, Georgia, South Carolina, North Carolina, and Tennessee difficult if not impossible for truckers.
Working capital is important to your business. At TBS we are here to help you look at the benefits of freight factoring and the additional services available.
How Freight Factoring Services Solve Seasonal Delays
Certain seasons are busier than others. During harvests, niche trucking industries like refrigerated trucking are going to be a lot busier getting crops from farms to food processing plants, warehouses, and retailers. Holiday sales pick up in the late summer and dwindle back down after Christmas. From January to August, jobs may not be as plentiful.
During those slow periods, there’s no money coming in because there’s limited work. If you don’t have money saved up, the lean months are tough. Saving every dollar you make is important. You need a good stockpile of money in your savings accounts.
How does freight factoring help you save? Think about the amount of time it takes brokers and shippers to pay you. If you’re waiting 30, 60, or even 90 days, paying bills in the meantime is tough. You’re accruing interest and even late fees. It’s also damaging your credit rating, which makes interest rates go even higher.
Worse, you might be unable to pay your workers’ benefits like health insurance, dental, etc. in the slow periods. It’s hard to retain your best drivers if you can’t keep paying for year-round benefits.
How Freight Factoring Helps With Weather-Related Issues
Financial implications of slow periods aren’t the only issue. Weather-related delays make it hard to keep supplies moving. If you have a long-haul driver heading across the country, there are restrictions on how many hours that driver can be on the road without taking a break.
If a bridge is out and creates a lengthy detour, your driver may run out of hours. That required break puts your driver behind schedule. Your client is upset, even though you couldn’t avoid it. That may lead to a loss of business or a penalty for the late delivery.
You require strong financials to keep your business afloat. However, you also need a wealth of additional services to ensure you’re efficiently running your business throughout the year.
Learn How Freight Factoring Works and the Additional Services That Are Available
Freight factoring is a service where you sell your unpaid invoices to a factor. That factor processes your request for instant payment and pays you the money due minus a fee. If you have just delivered a load worth $20,000. You’d get some or all of that $20,000 minus the freight factoring fee. If the fee is 5%, the freight factoring company keeps $1,000 and pays the remaining $19,000 to you.
There are a variety of freight factoring arrangements. You might get paid all of the money owed, or you might get 90% of it with the remaining 10% held in escrow until your client pays. It’s important to know that these arrangements require your client to pay the invoice. If that doesn’t happen, you might be required to repay the money you received in advance.
In addition to the instant payments, there are several other services available from freight factoring companies. Many of them help your trucking company save money. Use those discounts to build your savings accounts quickly. These services include:
- Assistance With Permits and Licensing: Getting started requires business and CDL licenses and the proper permits. It’s also important that these licenses and permits are renewed regularly to avoid penalties and suspensions.
- Business Credit Checks: You have an offer for work with a client you’ve never driven for before. Use business credit checks to research their history of paying drivers and other creditors on time.
- Discounted Insurance: When truckers are referred to an insurance partner, they gain access to the most competitive insurance rates for trucking companies. These savings can lower insurance costs every year, even if you drive hazmat or oversized loads.
- Find Loads: Freight factoring companies often have partnerships with companies that offer find load technology. Use that technology to search for more loads to haul in the slow periods.
- Fuel Cards: Receive a discount on every gallon of gas or diesel you purchase from a participating gas station or truck stop.
- Route Planners: Knowing road closures as soon as you can makes it easy to find the most efficient detour. Route planners help with that.
How Does Freight Factoring Differ From Loans or Credit Cards?
Why not just take out a business loan or charge your expenses on credit cards? That’s certainly one way to do it, but you have to consider the interest rates that are involved. Until you can pay off a credit card during the next busy season, you’re accruing interest. The interest builds up quickly, especially with the prime rate so high. As of October 2, 2024, the average business card rate was 22.14%. Personal credit cards ranged from 18.26% to 27.39%.
Business loans are a better financial product, but you often have to put something up as collateral if you don’t pay it back. If you put a truck or warehouse as collateral, late payments could put you in default. If you default, you lose that collateral, which destroys your trucking company. Is it worth the risk? Plus, average business loan rates are 7.7% to 9.1% for a line of credit or up to 16% for an SBA loan.
Freight factoring is a better option. You sign up with a freight factoring company and agree to a factoring fee. When you haul a load, you send your bill of lading to the factor and ask for immediate payment. The amount on the invoice is paid to you that same day or within a couple of days, and the factoring company keeps a fee. That fee is often less than 5%, so it’s far more affordable than credit card or business loan interest. Plus, you’re not at risk of losing your assets as freight factoring isn’t a loan.
When you face weather-related delays or seasonal slowdowns, freight factoring keeps the money coming in as quickly as possible. TBS Factoring is here for you. Reach us online to learn more about freight factoring and additional services that make it easy to plan routes, get fuel discounts along the way, and save money and time managing your business.