Professional truckers are essential to keep the country moving. They deliver food, medical supplies, clothing, and other necessities to stores and businesses every day of the year. Like other types of industries, however, the trucking industry can struggle with cash flow due to slow payments from customers. Not having enough money on hand to purchase fuel, pay drivers, or secure a load can mean losing a lot of business. Transportation factoring can be the ideal solution to this common dilemma.
Understanding Factoring for the Transportation Industry
When you work with a third-party factoring company, you sell that business one or more unpaid invoices from your best customers. The reason you want to choose your best customers is that the factor considers the customer’s credit history and not your personal credit or that of your company. Having this alternative financing option available can be a big relief for newly established trucking companies that can’t meet the criteria for a bank loan or that might have struggled with credit issues in the past.
After the factoring company approves your application and the invoices you submit, you receive a percentage of the invoice value within a few days. The factor holds back some of it until your customer pays in full and includes its service fee in the amount withheld. Compared to a bank that can take weeks or months to approve a loan, you have funds available from a factoring loan almost right away. This eliminates a lot of stress that can come from dealing with the extensive documentation requirements of banks and not feeling certain of your chances for approval.
Your customer pays the factoring company when the invoice becomes due. Depending on the arrangement you have with the factor, it may take over collection efforts if your customer doesn’t pay on time. That is yet another worry off your mind.
Emerald Valley Financial Services offers transportation factoring and many other forms of alternative financing for the transportation industry. Please contact us today to learn more.
