Trucking companies are being overworked during the COVID-19 pandemic and they aren’t getting the appreciation they deserve. With most of the world still quarantined in their homes, truck drivers are still driving thousands of miles each week to ensure deliveries and quotas are met.
Since most companies that need shipments delivered are also being hit hard during these difficult times, owners of trucking companies may see an influx of late payments and overdue accounts.
With freight factoring, these trucking companies are able to continue trucking along and finding ways to satisfy their deadlines. Let’s take a look at how freight factoring is helping and why your company should start taking advantage of it immediately.
What Is Freight Factoring?
Freight factoring allows a trucking company to receive an advance (80-90%) on overdue invoices with the help of a third-party company, also known as the factor. In addition to that, the factor will take over the responsibility of following up with your client and collecting payment.
The freight factoring process will essentially involve four major steps:
- Send the invoice to the client.
- Send information to factor.
- Receive advance from factor.
- Let the factor handle the rest; move on to the next job!
There are two typical transactions being made with factor services — recourse and non-recourse transactions. In recourse transactions, the trucking company will have to buy back any invoices the factor is unable to collect after a given time. With non-recourse transactions, the factor will assume liability for the unpaid invoice regardless of if they receive any payment.
Now that we’ve gone over the basics to freight factoring, let’s take a look at how it’s helping businesses during the COVID-19 pandemic.
Improving Cash Flow During Tough Times
One of the most significant benefits to freight factoring is maintaining cash flow when invoices typically aren’t paid until the 30-90 day mark. When you factor your invoices, the advance will generally be sent to you within 1-2 days. This means you’re getting paid much earlier than you normally would.
With all businesses hurting during the COVID-19 pandemic, your clients might have a more difficult time paying invoices on-time. This is even true for the clients you’ve been able to rely on for quick payment. Freight factoring will allow you to bypass any complications that could create.
Less Time Following Up, More Time Making Money
When invoices go unpaid, you and your employees are stuck with having to reach out to those clients frequently. Simply assuming you’ll be paid won’t always work, so it’s crucial to keep your clients on their toes.
With COVID-19 already causing trucking companies to change operations and processes, the last thing they need is to spend more time following up with clients. Luckily, your factor will take care of this responsibility so you can focus on the tasks that matter.
Whether it’s giving you the cash you need right now or giving you the time you need to keep trucking along, freight factoring has been helping trucking companies work through the COVID-19 pandemic ever since it began.
If you’re looking for quality freight factoring companies, contact us today and we’ll help match you with the right one!
References
Apex Capital Corp. “COVID-19 Crisis: Resources for Trucking Companies: Apex Capital Blog.” Apex Capital | Freight Factoring for Trucking Companies, www.apexcapitalcorp.com/blog/covid-19-crisis-resources/.