A Complete Guide to Freight Bill Factoring?
If you’re earning money through your trucking business, chances are, you’ve probably heard about “freight bill factoring.” In the trucking industry, you need to provide many things to your clients and your company to ensure smooth processing payments, and freight bill factoring easily comes to mind.
However, trucking companies and drivers are having a hard time understanding what this process is all about. So, what is this billing all about?
What is Freight Bill Factoring?
This type of freight invoice factoring allows trucking business owners to receive payment for the loads they run for their trucking business. Instead of waiting for around 2 to 3 months, you get paid immediately, which helps fund your other businesses or lets the money roll and keep the business moving. It is also called an “invoice advance loan.”
And it has become one of the best invoice funding methods as you don’t get paid immediately in this type of industry. The standards of the trucking industry are around forty days to process the full payment of truck drivers and trucking companies, and this 40-day window can make or break any trucking company that is relatively new or is making some financial constraints to their overall budget.
Back in the day, most freight companies rely on credit cards and bank loans to stay afloat. While this can be beneficial to some, it may lead to a whirlwind of trouble as the piling up of interest might be the deciding factor for trucking companies to pay as it can lead to debt.
With freight factoring invoices, trucking companies are ensured they get paid immediately, but this time, they sell their invoices to these third-party companies or other trucking factoring companies. The caveat is that these third-party companies buy these invoices at a slightly lower price, but they make it up by paying these trucking companies outright.
For some small-time freight companies, this type of immediate funding is detrimental to the overall operation as it allows them to cover various expenses such as fuel, driver pay, maintenance, and many more.
However, there are still some money factoring companies that can easily rip off any trucking company as they can buy these invoices at an extremely lower price. It is also one of the reasons why most trucking companies are skeptical about selling their invoices to these freight bill factoring companies.
How Does Freight Factoring Work?
As we’ve mentioned, freight factoring works by selling your invoices to these companies at a lower price. For example, if a client owes you $1000, it will take around 2 to 3 months before you can eventually get your pay.
But with an invoice advance loan, you can get paid immediately. However, that $1000 invoice can be sold for around $750 to $900, depending on various freight factoring services. If you get paid immediately in this industry, you can keep the ball rolling but will more likely deal with small losses than go into debt because you are paying bank loans with high-interest rates.
How Fast is the Application Process
Compared to the traditional standard in the trucking industry, where you get paid for around 40 days minimum and up to 90 days, the application process for this type of method can get you paid in a single day.
At best, you can get paid in the next hour if you provide all the necessary documents and the invoices. Some companies are versed enough that once you provide all the required documents and sign out different papers, you get your pay and get back to business. However, be sure to always read documents as most of these companies can rip you off with their extremely high interests and, for some, a binding contract.