Factoring and Financing for Trucking

Sell your freight and trucking invoices to get the cash you need immediately, without waiting for payment, giving your trucking business cash flow now. Funding your trucking company by factoring invoices can provide the cash flow you need to run your business in the fast lane.

Applying for transportation financing through Porter Capital gives businesses the cash flow they need to run their business without the hassle of worrying about billing and collections, making sure your drivers get paid instantly. Porter Capital has decades of experience helping fund the trucking industry.

Freight Bill Factoring

Freight bill factoring is when a trucking company sells its outstanding invoices, backed by bills of lading, to a factoring company or financial institution at a discount. In most cases, invoices can be converted into cash or “factored” very quickly, typically within 24-hours.

  • Factoring provides working capital that can be used to pay any expenses, such as repairs and fuel costs, as well as extend credit to new customers and make payroll

  • Porter Capital purchases invoices outright, meaning you do not have to worry about credit-related repayment risk

Freight factoring services are most often used by freight, rail and trucking companies in the transportation industry.

Due to the conflicting payment terms between shippers and carriers, cash flow problems are common in the industry-even for freight companies that routinely turn a profit. The shipper generally demands immediate payment, but the carrier usually does not collect until delivery.

While many business opportunities exist, profit margins can be slim for small and mid-sized trucking and transportation companies due to heavy competition and the lowest bidder often securing the job.

That is why many carriers rely on freight bill factoring to shore up their cash flow. The service allows them to get paid in 24 to 48 hours and requires dramatically less paperwork than a business loan.

How does freight factoring work?

Freight bill funding, or freight bill factoring is a working capital solution that allows a trucking business to monetize outstanding invoices and get paid almost immediately for work already completed. This is achieved by selling invoices to a factoring company.

After buying the invoices, the factor typically advances a large portion and takes out a small discount as payment. Trucking and transportation are amongst the industries that have the highest advance rate.

Factoring can help a freight business:

  • Ensure sufficient funds are available to cover fuel, vehicle maintenance and repair, containers, drivers’ payroll, licensing fees and insurance expenses.

  • Improve cash flow and operate in a more efficient manner.

  • Ensure money is available to bid on future jobs.

  • Expand company’s vehicle fleet to take on new routes or haul additional loads.

  • Invest in marketing or promotional activities to attract new business.

Some of the world’s largest consumer factoring companies include credit card companies, such as Visa and Mastercard. At the same time, commercial clients are served by specialized freight factoring companies and banks, like us here at Porter Capital!

Factoring relies on your clients’ creditworthiness, making it an ideal option for freight companies just starting out. To extend freight factoring services, factoring companies run a credit check on their clients.

This apprises you of your clients’ risk profile allowing you to make informed decisions about maintaining a business relationship with them.

Which types of businesses qualify for freight bill factoring?

Most trucking and transportation businesses qualify for invoice factoring. Companies that can benefit from freight factoring services include the following:

  • Large transportation fleets

  • Owner-operators

  • Intermodal and container companies

  • Freight brokers

  • Dump truck haulers

  • Long-haul truck load, local delivery or international

  • Automobile transporters

  • Haulers for credit-worthy shippers

  • Transportation companies that have not pledged accounts receivable as collateral

  • Hot shot drivers

The most important qualifier for getting approved for factoring services is a customer base with reliable credit history (with a record of paying bills on time). The second most important qualifier is that your invoices are free and clear, meaning you do not have any liens or loans that use accounts receivable as collateral.

Portal Capital Can Help

Freight companies often experience cash flow problems due to the incompatible payment terms that exist between the shipper and the carrier. Factoring, which is the sale of invoices to a specialized finance company, presents an optimal solution to this issue.

A factor typically charges a discount rate between 1% and 5%. Any trucking business with creditworthy clients and invoices unencumbered by liens or bank loans is generally eligible for factoring with Porter Capital.

If you need more information to get started with Porter Capital, please contact us at 1-205-397-0934.