1. What is invoice factoring and how does it benefit my trucking business?

Invoice factoring is where you sell your freight invoices to a factor at a discount for immediate cash, instead of waiting weeks or months for brokers to pay. This infusion of working capital helps cover operating expenses—like fuel, driver wages, and maintenance—and lets you grow without tapping traditional loans.

2. How much does factoring cost and what rates can I expect?

Factors charge a fee—typically 1% to 5% of each invoice—based on factors such as your monthly volume, average invoice amount, and the length of the broker’s payment terms. Some providers also levy a one-time setup fee for the first invoice and may offer volume-based discounts if you factor large dollar amounts consistently

3. Who is eligible for invoice factoring and what documents are required?

Most trucking companies and owner-operators qualify, provided they have creditworthy brokers or shippers and clean title to their equipment. Required documents typically include: Signed proof-of-delivery (POD) or bill of lading Broker or shipper invoice Carrier’s operating authority and W-9 form Voided business check for ACH funding

Factoring

Understanding Factoring for Trucking Companies

Factoring is a financial service that allows trucking companies to sell their invoices to a third party (a factor) at a discount. This service provides immediate cash flow to the trucking company, enabling them to cover operational expenses such as fuel, maintenance, and payroll without waiting for customers to pay their invoices. Factoring is a valuable tool for managing cash flow and supporting growth, especially for small to medium-sized trucking businesses.

How Factoring Works

Invoice Submission: The trucking company submits its invoices to the factoring company.
Cash Advance:The factoring company provides a cash advance, typically 70-95% of the invoice value, to the trucking company.
Customer Payment: The customer pays the invoice amount directly to the factoring company by the due date.
Balance Payment: The factoring company then pays the remaining balance to the trucking company, minus a factoring fee.

Popular Factoring Companies for Trucking

1. Triumph Business Capital

2. TBS Factoring Service

3. RTS Financial

4. Apex Capital Corp

5. Riviera Finance

Considerations When Choosing a Factoring Company

Recourse vs. Non-Recourse: Understand the difference between recourse factoring (where you're responsible if the client doesn't pay) and non-recourse factoring (where the factor assumes most of the risk).
Fees and Rates: Compare the fees and advance rates. Some companies may offer lower fees but provide a smaller advance on the invoice.
Additional Services: Evaluate the additional services offered, such as fuel discounts, maintenance discounts, and credit checks, which can add value beyond the basic factoring service.
Contract Terms: Be aware of the contract terms, including the length of the contract, minimum volume requirements, and termination fees.

Conclusion

Factoring can be a powerful tool for trucking companies looking to improve their cash flow and grow their business. By understanding the pros and cons of different factoring companies, trucking businesses can select a partner that best fits their needs and helps them achieve their financial goals.

Factoring FAQs

1. What is invoice factoring and how does it benefit my trucking business?
Invoice factoring is where you sell your freight invoices to a factor at a discount for immediate cash, instead of waiting weeks or months for brokers to pay. This infusion of working capital helps cover operating expenses—like fuel, driver wages, and maintenance—and lets you grow without tapping traditional loans.
2. How much does factoring cost and what rates can I expect?
Factors charge a fee—typically 1% to 5% of each invoice—based on factors such as your monthly volume, average invoice amount, and the length of the broker’s payment terms. Some providers also levy a one-time setup fee for the first invoice and may offer volume-based discounts if you factor large dollar amounts consistently
3. Who is eligible for invoice factoring and what documents are required?
Most trucking companies and owner-operators qualify, provided they have creditworthy brokers or shippers and clean title to their equipment. Required documents typically include:
- Signed proof-of-delivery (POD) or bill of lading
- Broker or shipper invoice
- Carrier’s operating authority and W-9 form
- Voided business check for ACH funding