How to Choose a Trucking Factoring Company to Minimize Financial Exposure

Cashing in an invoice may take several days or weeks. In the meantime, overhead costs continue to rack up, drivers’ wages, and utility bills will need to be settled. But, what if there’s something you can do about it?. Below in this article, we will cover How to Choose a Trucking Factoring Company to Minimize Financial Exposure.

Since small business owners own the majority of trucking companies, it is standard practice for them to get financing solutions. 

That is where trucking factoring companies come in. These companies can cover the outstanding invoices of the trucking fleets for a small charge. When the payment date is up, trucking factoring companies can also collect the invoice from your customers.  

Data show that 9 in 10 of these companies only have fewer than six trucks in their fleet. By the nature of their operations, they can’t afford delays with the invoice payments. 

How much of the invoice will the trucking factoring company cover?

Typically, the freight factoring company will cover as much as 80% or 90% of the total invoice. The amount will be paid upfront. The remaining balance, minus the truck factoring fee, will be paid to you once the customer settles the outstanding invoice.

For example, if your invoice is $10,000, you can expect to get at least $8,000 upfront in as little as 24 hours after signing the agreement. The amount can go a long way to sustaining your operations as you look for more customers.

Low-volume factoring vs. high-volume factoring

Volume factoring will depend on the amount of outstanding invoice, a particular company anticipates per month.

For instance, low-volume factoring is when the outstanding invoice is less than $30,000 per month. Meanwhile, high-volume factoring is when the unpaid invoice is more than $30,000 a month. 

Each freight factoring company, however, has different standard amount limits. The difference would be on the charges as well as the discount rates; you may receive. 

More extensive operations often have higher invoice amounts, so they get higher discount rates. The charge each freight factoring company collects depends on the total number of the outstanding invoice.  

Minimizing risks

Several factors come into play to qualify for freight factoring financing. At the very least, you should be in operations for at least three months with a good credit rating score. Your annual revenue will also be taken into account to determine what rates you are getting. Nevertheless, each application will be assessed individually by the freight factoring company.

The interest rates are typically charged per week. If you balk at the charges, please understand that trucking factoring companies assume all the risks associated with non-payment of the invoice.

The trucking fleet is already paid 80% of the invoice amount upfront. Even if the customer fails to settle the obligation, you previously earned $8.00 for every $10.00 you owe. Meanwhile, the financing company will end up holding an empty bag. 

If you’re looking for financing, check out SoundFinance. They offer meager factoring rates, single-day payments, and secure online approval. They also provide multiple payment options for added convenience.