The freight business has been seeing lower demand for a couple of years now, but things hit a record low with the COVID-19 pandemic outbreak. Ups and downs are expected in any industry, but no one could have foreseen a dip like this one.
With nationwide shutdowns, protests, and an unpredictable future, 2020 has done a number on the trucking industry, with the trucking industry losing over 88,000 jobs in April, a 5.8% drop from March. A recent survey found that 48% of carriers have reported “significantly” decreased loads, with the East Coast being a significantly affected area.
There’s a chance that things could improve, but with no way of knowing, businesses are likely going to err on the side of caution, and loads will continue coming in slowly. With the alternate possibility of things getting even worse before they get better, your transportation will also want to err on the side of caution and do everything you can do maintain steady cash flow.
That’s where freight factoring can help your business. Keep reading to learn more about freight factoring and how it can help protect your freight company financially during these unprecedented and trying times.
What is freight factoring?
Freight factoring is a process that allows freight companies to maintain steady cash flow without spending their own time and energy to do so. The problem originates when the freight business’s client is late paying their invoices.
Factoring helps businesses circumnavigate this annoying problem because the factoring companies send transportation companies an advance worth around 85% of the unpaid invoice.
The trucking company will then be free to focus on what they do best (growing their business) while the factoring company reaches out to the client to get them to pay the invoice ASAP.
Once the client pays the invoice, the factoring company returns the rest of the unpaid invoice and takes a small cut for themselves. This way, both companies win.
How can freight factoring help my trucking company through tough times?
From the above explanation of how freight factoring works, you probably have a good idea of how it could be beneficial during tough economic times. Freight factoring can help your trucking company through times of slow business in two key ways.
First, it will allow you to receive immediate payment for your loads. With some brokers taking up to a month to pay (with wait times even longer in tough economies), it’s not hard to see how immediate payment can help freight businesses avoid some severe cash crunches.
With factoring, you can forget the stress of upcoming bills, and you won’t have to turn down great loads because you don’t have the cash just yet. In this way, it creates a cycle of better business with less stress and more revenue.
Second, freight factoring isn’t a loan. You aren’t on the hook for fees even when you don’t decide to factor, and you don’t owe your freight factoring company anything once you’ve worked together. Again, factoring companies get paid through the small cut they take from the invoice once paid. And if the invoice remains unpaid, after their efforts to collect payment, then you will have to repay the advance.
Let us help you find the best factoring company for your freight business!
If you want to give your trucking company a boost, get started with freight factoring today! Head over to our ratings so you can see the best freight factoring companies for trucking businesses you should consider signing a contract with. If you have further questions about freight factoring rates or the best freight factoring company for you, contact us today, and we’ll assist you!