UNITED STATES—The economy is strong, and for many carriers, business is booming. In fact, according to Transport Topics, Wal-Mart is going so far as to double its spending on drivers by the end of the year. Describing the current driver shortage as “a really serious situation,” Wal-Mart’s senior vice president of transportation says that they could easily hire as many as a few hundred new truckers. While this competitive market may be good news for drivers, it may not be as reassuring for other carriers. Wal-Mart is one of the world’s largest corporations, and although they can certainly afford to dish out the required cash for hiring, smaller carriers may not be able to match that expenditure if they want to secure a long-term contract with the retailer. So how are those carriers supposed to compete?
The answer, according to many in the industry, may lie in freight bill factoring. Freight bill factoring is a common industry practice in which invoices that are current and unpaid are converted into cash through a third party known as a “factor.” For capital-intensive industries such as trucking, in which some customers can take as long as 90 days to settle an invoice, freight bill factoring can be a game changer: it offers same-day access to those frozen funds, which can then be put towards business growth or unexpected expenses. This allows startups, high-growth companies with insufficient working capital, or even larger carriers going through a lean year the necessary cash flow to keep themselves competitive with companies like Wal-Mart. Carriers effectively sell their unpaid invoices at a discount for a generous cash advance, and are remitted the reserve amount when the factor collects on the invoice on the carrier’s behalf.
Freight factoring is not a loan, which means that your business can qualify even if you lack serious collateral or have less-than-stellar credit. Because qualification is based in part on the credit worthiness of your customers, so long as they maintain a good payment record, your chances of qualifying improve considerably. If you’re curious about how factoring can help your trucking company, consider what can be gained when you work with a factoring receivables company — and get familiar with plans and options so that you can capitalize.
The fee paid is nominal, and carriers have a variety of factoring options tailored to their size and style of operations. Carriers can choose whichever option they feel suits them best. The following examples use the offerings of Accutrac Capital as an example:
– Flat Fee Factoring, for instance, starts at 1.59% all-in for 90 days. This is the most common option that Accutrac provides, as it is simple and the on-time cost is easy to calculate.
– Flex Factoring starts at only 0.49% for up to 10 days. This option represents an industry-leading rate, and is ideal for carriers whose customers tend to pay promptly.
– Factoring Lines of Credit are designed for larger fleets, and start at 0.022% per day, which offers maximum flexibility and control for carriers who are in the right positions.
As the industry grows, your potential to grow alongside it depends on access to cash flow, and freight factoring could very well be the break you need to help your business reach its biggest numbers yet.