Freight factoring ― also referred to as trucking factoring ― is a form of invoice factoring that allows transport companies, including owner-operators, to turn unpaid invoices into immediate cash. It is common for a trucking company to use freight factoring to cover cash flow gaps while they wait to be paid by their shippers or freight brokers.
If you’re looking for a freight factoring company whether you are starting out, sole truck driver / operator / owner or owning an existing fleet, you may qualify at Gsquared Funding . It offers financing from $5,000 to $5 million with rates starting at 0.25% per week. Prequalify online in minutes and get funded in as quick as 24 hours.
What Freight Factoring Is
Freight factoring, or trucking factoring, is an accounts receivable factoring option that monetizes your outstanding invoices by paying immediately for work you’ve already completed. The factoring company will traditionally pay you 80% to 90% of the value of your outstanding invoice upfront and pay the remaining balance minus their fees once your customer pays the invoice.
Freight factoring is beneficial to both small owner-operators looking to get paid immediately to take on additional work and for larger trucking businesses looking to fill a cash flow gap. It is also a great way to get financing if you’re not a prime borrower. You can qualify based on the creditworthiness of your customers instead of your own.
The terms and qualifications for freight factoring will typically vary based on how much factoring you need. Larger trucking companies who do $30,000 or more per month in invoice volume will typically seek different factoring companies than smaller owner-operators doing less than $30,000. Our comparisons throughout this article will take both types of businesses into account.
Top Freight Factoring Companies
When looking for a freight factoring company for your business, you need to know the volume of the invoices that you plan on factoring and what your goal is. If your goal is to outsource your accounts receivable process, you’ll want a different type of factoring company than someone looking to get quick financing.
A reputable company that provides freight factoring is Gsquared Funding. Gsquared Funding’s Factoring program is flexible enough that it could be a solution for both smaller trucking companies and larger ones. They provide access to Compliance officers, Trucking Insurance, and access to dispatchers tailored to your class of freight whether its, Reefers, Flat Beds, Box Trucks and so on. With flexibility in their contract terms, these range anywhere between 30 day to 1 year contracts at competitive rates.
You can contact Gsquared Funding here on 678-352-2439 or simply complete the form below to have a representative contact you directly to discuss your factoring needs.
Freight Factoring Rates, Terms & Qualifications
The rates, terms, and qualifications for freight factoring vary based on the size of your company and the value of the invoices that you are factoring. Larger trucking companies might factor all of their invoices via contract factoring while smaller trucking companies are more apt to utilize spot factoring and only factor select invoices.
The following are the freight factoring rates, terms, and qualifications for both small and large trucking companies.
Freight Factoring Rates
The rates charged for freight factoring differ depending on whether you utilize contract factoring or spot factoring. Smaller companies can expect discount rates ranging from 2% to 5% while larger companies can expect 0.5% to 5%. You may also be charged an origination fee when you first set up your account with the factoring company.
The following are the standard rates that a smaller trucking company can expect with freight factoring.
How Freight Factoring Works
With freight factoring, your invoices due within 90 days are sold to another company, referred to as a factoring company. You receive an initial advance from the factoring company of approximately 80% to 90% of your invoices value upfront. Once your customer pays the invoice, the factoring company pays you the remaining 10% to 20% minus fees.
According to a report issued by the Bureau of Transportation Statistics, freight moved by trucks accounts for 70% of all the freight moved by U.S. businesses and is expected to account for 76% by 2045. This level of demand provides trucking companies with plenty of opportunities for additional work. However, it’s difficult to take on more work without sufficient cash flow. That’s where freight factoring, which typically has five steps, comes in.
1. You Invoice Your Customer
The freight factoring process begins with you issuing an invoice to your customer for work performed. There must be an outstanding invoice to your customer before you can begin the freight factoring process as the invoice is the basis for the factoring agreement.
2. You Assign Invoices to a Factoring Company
Larger volume factoring, also known as contract factoring, requires you to sell and assign all of your invoices to the factoring company for them to collect. Low volume factoring, or spot factoring, typically works more like a line of credit and allows you to pick and choose which invoices to factor with your factoring company. However, the arrangement may vary based on the provider you are working with.
3. The Factoring Company Pays Your Advance
Once you have selected the invoices that you will factor, the factoring company pays you for a percentage of the value of the invoices. The amount that you are paid depends on the advance rate that you agreed to with your factoring company, which is usually 80% to 90%. Payments with Gsquared Funding can be instantly wired to your account or next day direct deposit.
4. Your Customer Pays the Freight Factoring Company Directly
Your customer pays off the invoice by paying the trucking factoring company directly. Most often, these payments are sent to a lockbox in your name and made payable to you. However, the factoring company controls both the lockbox and the deposit account. Using contract factoring, the responsibility for collecting customer payment is shifted entirely to the factoring company.
5. Factoring Company Pays You Remaining Balance Less Fees
The factoring company, at this point, will take their fees out of the customer’s payment and forward you the remainder. While this is typically how invoice factoring works for transportation companies, you can see that there are some slight differences based on what your factoring volume is.