How Fleets Can Benefit from Freight Factoring

Factoring is used by thousands of trucking companies to get paid faster instead of waiting weeks for direct payment from brokers or shippers. They simply sell their unpaid invoices to a factoring company for a small fee and in exchange they get paid sooner, sometimes in as fast as 15 minutes. 

Factoring has long been popular with smaller or more newly established carriers to help maintain a consistent cash flow, but it’s increasingly being used by larger fleets as well. 

So what are the benefits of factoring for medium and large size fleets? They get to worry less about finances, assume fewer risks, save time, and get help with growth and efficiency. So a lot.

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Reduced financial stress

While factoring does come with a fee, it also provides a wide range of benefits that can help carriers save money.  

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Faster funding

One of the frustrations with the current payment system is carriers often wait weeks to get paid for completed work. And while they wait they still have expenses like fuel, payroll, and more. With factoring the lengthy wait is eliminated. 

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Consistent Cash Flow

Planning and budgeting are obviously much easier with a steady income stream during the ups and downs that come with the trucking industry. 

Depending on the factoring company, a carrier doesn’t have to factor every load. They can pick their spots and only factor when they need it. 

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Visibility

Some factoring companies provide a way for carriers to view their financial activity in real time. Outgo offers its customers an all-in-one financial platform to not only factor, but also track expenses, payments, invoices, and more—all in one place. Either through iOS, Android, or web, a carrier can keep up on all their financial activity right at their fingertips. 

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Flexibility

In trucking, there’s no shortage of surprises that can muddy finances. And when they do happen, there’s greater urgency around when payment will arrive. Factoring provides peace of mind for carriers in knowing that since they’re approved for factoring and can get paid when needed.

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Deals for fleets

Factoring rates tend to be lower for larger fleets, which increases the appeal. Because of their size, scale, and invoicing volume fleets are considered more reliable for factoring companies. By conducting more business they typically have more stable cash flow and a wider variety of customers. 

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Lower credit card costs

Factoring only when needed eliminates the need to put fuel or other expenses on a credit card, which helps avoid paying interest.

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More info, less risk

Factoring companies can help protect their carriers from being taken advantage of or being the victims of fraud. They can help them avoid scams, alert them to fraudulent brokers or shippers, and flag companies at risk of not paying on time or at all. 

Credit checks

Factoring companies will typically provide credit checks to provide insight into the reliability of any brokers or shippers a carrier intends to work with. Outgo even offers [Broker Board], a free service that allows you to browse thousands of brokers to view their risk rating, support, contact information, and more. 

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Non-recourse factoring

All factoring companies take on the job of collecting payment from the shipper. That’s standard. However, some companies offer [non-recourse factoring], in which they also take on responsibility in the event the broker or shipper fails to pay because they’ve gone bankrupt or out of business. With non-recourse, a carrier generally doesn’t have to pay that money back. The factoring company eats the loss and the carrier keeps its money. 

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Saves time and money

‍Back-office support

As a trucking business grows, the administrative needs do also, but a good factoring company can scale with it. A factoring company can provide companies with the means to streamline their operations, add efficiencies, and keep the business moving forward. So as invoice volume increases, it shouldn’t necessarily require more time or personnel. 

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Invoice management

All factoring companies will buy invoices from carriers, but only some also offer automated systems that create and upload invoices in a flash. For instance, Outgo provides the ease of simple document uploads and automatic invoice creation.

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All-in-one financial suite

Managing a business across multiple accounts is difficult and time consuming. A good factoring company should provide an [easy-to-use platform] from which freight carriers can manage their businesses from. They get invoicing, banking, reporting, integrated TMS payments, driver payments and more, all in one place and right at their fingertips.

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Outsourcing collections

A factoring company takes on the responsibility of collecting payments so carriers don’t have to. That means streamlined reconciliation and bookkeeping, as well as fewer calls and emails, and less checking the mailbox or peeking in accounts to see if a payment has arrived.

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More time back

Needing less time to operate a business means having more time for growing and improving it. And that’s what it’s all about.  

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Still have questions?

Interested in learning more about getting factoring for your fleet? At Outgo, we believe in transparency and working with individual freight companies to come up with the best plan for them. If you have factoring-related questions you want answered, give us a call at +1 (888) 308-8810 or visit Outgo.com.

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