The Fundamental Guide to Everything You Wanted to Know About Freight Factoring

In this A-Z guide to the fundamentals of freight factoring, also known as invoice factoring, we have compiled all the answers to the questions that owner-operators and trucking companies have about freight factoring and how it can help them run their businesses:

  • Why do people use freight factoring?
  • Is factoring your loads really necessary?
  • How does freight factoring work?
  • What can freight factoring do for your business?
  • Who can qualify for freight factoring?
  • How to choose the best freight factoring company for your needs.
  • What are the different kinds of factoring available?

If you are curious about factoring, you’ve come to the right place. Read our guide to freight factoring for an in-depth explanation of freight factoring and its many benefits to owner-operators and trucking companies.

Many new owner-operators have misconceptions about what freight factoring is and how it can help them streamline their trucking business.

In this guide, we explain freight factoring and provide more information about this essential service. We also touch upon those things to watch out for when considering signing up with a freight factoring company.

But first things first.

Why Use Freight Factoring?

Many companies take anywhere from 30, 60, or sometimes 90 days to pay their invoices.  This can cause serious cash-flow problems for owner-operators who need money to pay for fuel and other expenses to keep on driving. Luckily, there’s a solution.

  • Owner-operators and trucking companies who sign up for factoring services don’t have to wait to get paid
  • In many cases, the factoring company will pay the factored invoice within as little as 24 hours
  • You can usually complete the application process quickly and online
  • “Good” credit isn’t a requirement for applicants
  • Owner-operators can keep driving knowing that their money will be paid promptly on delivery of their loads
  • Owner-Operators never have to stress out about going after clients for payment

Companies like Pay4Freight that offer factoring services understand the unique needs of truckers and owner-operators.

Is Factoring Your Loads Really Necessary?

For those owner-operators who have enough cash to keep the wheels rolling while they wait for their invoices to be paid, factoring is not necessary. Similarly, if you are able to devote time every week to make the calls to check on the status of your invoices, you might not need to use an invoice factor.

How Does Freight Factoring Work?

  • With freight factoring, you’ll sell your most recent invoices to a reputable company like Pay4Freight.
  • When you factor your loads, you will no longer have to worry about collection headaches
  • You’ll get all of your money up-front, less a factoring fee
  • It can be well worth it when you consider the many benefits of having steady cash on hand as well as not having to stress about chasing after the money

What Can Freight Factoring Do for Your Business?

  • When you have a steady flow of cash from your recently completed loads you can run your operations with greater certainty and efficiency
  • You might, for instance, use your factoring payments to update your existing trucks or add to your fleet
  • You could use that capital as a way to take on more clients
  • Or you could use it to ease the burden of expenses for maintenance and fuel

Who Can Qualify?

Anyone working in the freight transportation industry as an individual independent contractor or as a company can take advantage of factoring programs.

In addition to large companies with extensive fleets, freight factoring can help smaller companies with a single truck too.

Trucker talking to a freight factoring company A Guide To Choosing the Best Freight Factoring Company for Your Needs

Every person is different, and each company is unique. There are many things to look out for when choosing a freight factoring company.

We urge all people interested in factoring to do their homework. Most of all do not sign long-term contracts without reading the fine print.

We structure our contracts so they are easy to understand. All the important terms are on the front page, which shows you that we are honest and transparent in our business dealings.

Freight factoring can make a big difference to a company, but it’s so important to factor with a reputable company.

Different Kinds of Factoring

As you can see from reading this guide to freight factoring, you get different kinds of factoring, and it is essential to understand the pros and cons of each type factoring. For more information, read more about recourse vs non-recourse factoring.

Recourse factoring is when the invoice reaches a specific determined date you have to repurchase the invoice.

Non-recourse factoring is when the financial risk shifts to the factor instead of the client, for example, when a company goes bankrupt or  insolvent.

At Pay4Freight, we have helped many owner-operators and small t0 mid-sized trucking companies grow year-over-year. Many of our clients (who we refer like to as “partners” have stayed with us for years and years and that says something about how we do business).

If you are interested in working with a company with strong ethics, find out more about what drives us every day or give us a call at 888-479-4378 or send us an email.

Ready to Sign Up for Freight Factoring?

Take a look at what is required to get your authority, if you haven’t done so already. Read about our promise to our partners here.