What is Freight Bill Factoring?
by Arina Smith Business Development 21 June 2018
Are you tired of waiting weeks or months to get paid by shippers? Are you ready to have the financial security you need to keep your trucks on the road and increase your profits?
If so, then freight factoring may be just what you need. Keep reading to learn about freight bill factoring and how it can help your business.
What is Freight Bill Factoring?
Freight bill factoring uses a third party to pay carriers and owner-operators for loads more quickly.
Sometimes shippers can take weeks or months to pay for freight loads, meaning drivers and freight brokers have to wait long periods of time before getting paid for their hard work.
With a freight factoring company, freight bills and invoices are paid immediately. It is a quick and simple solution to keep your cash flow healthy. No more waiting for payment means your business can stay on the road worry-free.
How Does Freight Factoring Work?
Freight factoring is not a loan. This means you don’t have to worry about paying freight factoring companies back and there are no interest rates involved.
So, how does it work? Basically, carriers provide the freight bill and invoice to a freight factoring company. Then, the freight bill factoring service pays the carrier up to 98% of the bill amount.
And that’s it.
The freight factoring company will handle everything with the shipping company. They will submit the invoice to the shipping company, request payment, and receive the payment later.
Sometimes the freight factoring process is referred to as freight bill “purchasing”. This is because the freight factoring company “purchases” the invoice from the carrier or owner-operator. This makes them the owner of the bill and from there on out responsible for it.
How great is that? Freight factors handle the rest of the hassle of receiving payment after they pay you. They are the ones that will deal with the waiting, multiple requests, and headaches from shippers who fail to pay in a timely manner.
To make it a bit easier to understand, here are the steps of freight bill factoring:
- Owner-operators or carriers deliver their loads and receive the invoice from the shipper and generate the load bill.
- Carriers submit a copy of the freight bill and invoice to the freight factoring company. Most freight factoring businesses offer easy electronic submissions such as scanning, emailing, or uploading to an app. Sometimes you can simply take a photo and submit it via your phone.
- After verification of freight delivery, the freight factor provides up to 98% of the bill amount to the carrier company. Most will provide same-day cash. The funds are transferred to you via electronic wiring, check, or loaded onto a fuel card.
- The factoring company requests and collects payment from the shipper.
What are the Benefits of Freight Bill Factoring?
To start, freight bill factoring is not a loan. You don’t have to worry about interest and debts to repay. Plus, there are no credit checks or financial analyses involved. This makes freight factoring a superb option for small fleet businesses that may not have established credit needed for loans.
Secondly, having fast cash means security for your business. By using freight factoring, freight companies have the funds they need to not only pay drivers, but also for fuel, maintenance, and general operations.
Your drivers will be much happier and more productive, too, since they are getting paid in a timely manner and have more opportunities to be on the road making money.
There are many additional benefits of using a freight factoring company. Most factors are partnered with fuel discount cards, so you can fuel up for less and receive rewards and rebates.
Others are part of fleet membership programs that provide discounts on everything from fuel, maintenance, tires, and hotels.
One of the largest benefits of signing up for freight bill factoring is the load boards. Carriers have free access to load boards which help match trucks to loads quickly and consistently.
There are no long-term contracts, typically no sign-up fees, and no minimum bill requirements with freight factors. It doesn’t matter your business size. You can be a single owner-operator with one truck or a 100-truck fleet. Either way, you’re qualified.
How to Start Freight Bill Factoring:
You should be! Freight factoring is too easy to pass up. Plus, it gives your business positive cash flow. You never know when you may need emergency funds, especially when on the road.
Don’t let your business suffer by getting stuck off-road due to maintenance issues or waiting for payment for fuel and operations.
All you have to do is contact a freight factoring company online or via phone and request to sign up. They will offer you a quote on their payment percentages.
Shop around to find the best deal. Some freight factors will offer 98% of bill amounts. Find the company that offers the most cash and has zero or very low fees.
When you complete an application for freight factoring, you’ll need to provide your operating authority and proof of insurance. Click here to learn about the best insurance plans for small businesses.
Aside from general fleet information such as the number of trucks in your fleet, your DOT numbers, and contact information, that’s all you need to submit.
No background checks and no credit checks are involved.
You’ll generally get approval within 48 hours. Once approved, you can start reaping the rewards and getting paid for invoices!
Improve Your Business and Your Bottom Line:
Tips like how and why you should use freight bill factoring can help you improve your business and get more profits.
At Real Wealth Business, we offer advice and information for business owners. From financing, sales and marketing, technology, and more, we’re your one-stop shop for ways to make the most out of your business.
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