What Is Truck Factoring?
After your trucks haul cargo for customers, you often have to wait for payment. You have expenses that include payroll, fuel, insurance, and repairs, among others, for which you can’t delay payment. You may also need funds to transport the next load.
Rather than wait for what could be up to months for customers to pay, you can sell your outstanding invoices to a factoring company (factor). The factor pays you a cash advance, which can be as high as 98 percent of invoice totals. The factor then collects the full invoice amount from your customer.
How Much Does Truck Factoring Cost?
The difference between the cash advance you receive and the invoice amount is called the reserve. You will have to pay a factoring fee in addition to that. Factoring fees and rates vary.
The costs start with a fixed amount according to the factor’s fee structure. Volume discounts are available as your company grows and are described in your contract. Items to avoid include early termination fees, minimum volume fees, and fees to process your application or set up your account.
What Else Should I Know?
You are not obligated to sell all your outstanding invoices to the factor. Choosing which ones to sell and when to sell them is known as spot factoring.
Truck factoring is not a loan or line of credit, and you do not pay interest. You do not have to have good credit. You submit an application to the factor that includes documenting business information such as your operating authority.
Acceptance of your invoices is based on your customer’s creditworthiness. If accepted, you usually receive your cash advance within 24 hours. Unless you pay a higher fee for non-recourse factoring, you are liable if your customers don’t pay the factor.
Emerald Valley Financial Services offers financial solutions designed to meet your needs. Our team of experts can also help you with marketing your company. Contact our professionals today to learn more about your options and get all your questions answered.