The transporter will sell their outstanding invoices or bills of lading to truck factoring companies in exchange for ready cash. Since delayed payments will cause cash flow issues, freight factoring steps in to seal the financial gaps. For most, the waiting period is usually 30, 60, or 90 days. If anything, the industry standard between delivery and payments to trucking companies is 40 days.Įxpectedly, most freight companies will offer a short-term grace period before requiring their customers to pay for the transportation services.
Just like other industries where large sums of money are involved, it’s not realistic for freight companies to expect full payment upon delivery. What is freight factoring?įreight factoring is a flexible source of funding that allows a trucking business or owner-operators to make deliveries and issue invoices and instead of enduring the typical payments delay, they can sell that invoice to a factoring company for a ready cash amount that’s slightly less than the invoice amount. If you are looking for a way to bridge cash flow shortages, here’s all you need to know about factoring for trucking companies. Even though you will be providing your transportation service consistently, your customers may not pay you every time you make a delivery, causing cash shortages. Some of these expenses can occur abruptly, such as a vehicle breakdown. On average, fuel costs will set back a mid-sized trucking business $50,000-$70,000 yearly, while tire replacement pricing is between $1,000 and $4,000 per truck. If you run a trucking company, you understand how fuel, insurance, repairs, and maintenance costs can eat through your revenue, negatively affecting cash flow.