S&P Global Ratings just dropped its rating on Accuride, a company that manufactures commercial truck parts. By the end of the year, it’s estimated that the company will have a deficit of almost $35 million. They’re not alone. Brokers, shippers, and trucking companies have been closing down at an alarming pace over the last two quarters.
With the freight industry feeling the pain of an ongoing recession, it’s hard to stay positive. But, it’s also important to know that freight factoring is a helpful way of managing the slow periods and making it through. It’s not the first time the nation has struggled with a recession, and it won’t likely be the last.
Freight factoring is a way to get through because you get paid now rather than weeks or months later. For a low factoring fee, usually less than 5%, you submit a bill of lading and get paid that same day in some cases. You don’t have to wait to get paid, and that makes it easier to keep up with bills and avoid late payment fees or negative marks on your credit history.
It’s an ever-changing industry. Discover the trends and innovations that are changing the face of freight factoring and how it helps business owners and owner-operators.
Q3 Trends in Freight Factoring
We’ve picked out the biggest trends we expect will impact the freight factoring industry in the upcoming months.
Faster and Easier Financial Transactions
Fintech is shaping the industry to ensure payments are made at lightning-fast paces. Mobile banking and payment processing apps all embrace the convenience that fintech brings. Instead of waiting for a check to clear, have your clients pay automatically through an app or a link on the invoice you send via email.
It also makes freight factoring much quicker. You can submit a bill of lading in the morning and have the payment by the afternoon.
More Demand for Freight Factoring Arrangements
It was initially expected that the federal rate would decrease slowly during 2024. That hasn’t happened, and it’s starting to look unlikely that it will happen. Because of this, interest rates on credit cards, small business loans, and business lines of credit remain high enough that it’s eating into profits.
If you’ve been using a company credit card or line of credit to cover gaps between incoming payments from brokers and shippers, you’re losing money each time you miss a payment or as your balance climbs. Freight factoring arrangements, while you do pay a fee, are cheaper than credit card or loan interest rates.
Increased Value in Extra Services
Freight factoring arrangements are great for providing fast payments, but there has to be more on the table. Fuel discounts are a must. If your trucking company could benefit from saving a dime, a quarter, or even a half dollar on every gallon of gas, it adds up fast.
Before you take on a new client, you want to make sure that the client isn’t going to be a dud. You can use free business credit checks to verify that the broker or shipper has a solid history of paying invoices on time and doesn’t owe a lot of money to your competitors.
Other beneficial services include load-finding boards. Having access to a board packed with jobs around the country is helpful in ensuring your trucks are full on both the trip out and back. It also helps you expand your client base. In the third quarter, trucking company owners are going to be working hard to find as much work as possible and at favorable rates.
What Innovations Are Likely to Impact Freight Factoring?
Those are the trends we expect to see in the third quarter. What innovations are going to gain traction?
AI
People associate artificial intelligence as a big, scary thing. It’s not and we’d like to clear that up. Used wisely, AI can quickly analyze your routes and find faster, more fuel-efficient options. AI can help you choose jobs that load your truck to the max without becoming overloaded. It can also analyze your employee benefits package and ensure you’re competitive.
FinTech
Technology constantly changes. If you go back just 25 years, most people had to access the internet via slow dial-up connections. Sending and receiving information was painfully slow and tied up phone lines. Everything is so fast today. Sending and receiving payments can be instantaneous with some of the apps available with freight factoring companies.
Online Platforms and Apps
Freight factoring companies are embracing real-time tracking for all transactions. You’ll find it’s much easier to keep up with payments, track where a load is, and what your obligations are when you submit a bill of lading for payment.
With most apps and online platforms, you can get notifications each step of the way. Check-in quickly when you arrive, and have real-time GPS tracking verify that you’re at the loading dock. That speeds up payment processing times.
Tips for Finding the Best Freight Factoring Partnership
Don’t rush into a freight factoring partnership without doing your research. Look at different factors and find out their rates, what special features they bring to the table, and what others in the industry have to say about them.
As you read reviews, make sure you’re paying attention to reviews on things that apply to you. If a trucking company owner is upset that the rates were too high because he failed to fully read and understand the contract, that’s his mistake. Make sure you carefully read the terms and ask a lawyer if you’re unsure what something means. I
If you see a review that states that reaching customer service is impossible, that’s something to ask the factoring company about. How do you reach them, and what are their hours?
Ideally, you want the best match for your needs. You want rates you understand and feel are fair. Pay attention to your obligations and make sure you can meet them. Look for contracts where you can pick and choose which clients are submitted for factoring and which aren’t.
TBS is a leader in freight factoring. We have decades of experience in freight factoring and provide additional services like insurance discounts and fuel discounts to help you save additional money each month. Learn more by reaching us online or by phone.