If you’re a new trucker, you’ll definitely want to be in-the-know when it comes to all things related to freight factoring. Factoring your loads is a process that can be convenient in many ways for both established trucking businesses and truckers just getting started on their own trucking company.
Specifically, it’s a way to handle invoicing that can be especially beneficial for drivers working as owner-operators. Keep reading to get a better understanding of the basics on freight factoring for new truck drivers with this handy factoring guide. However, if you are an experienced trucker or trucking company that wants an in-depth guide on freight factoring do well to check out our article on Freight Factoring for Trucking Companies and Owner-Operators.
What’s also called freight or invoice factoring is a process that involves selling invoices to a company that specializes in factoring. Once the factoring company buys the invoices, the owner-operator or trucking company will receive immediate cash. The factoring company will then work with various clients linked to the purchased invoices to collect what’s due.
The factoring company typically charges a reasonable fee to clients. A reputable company will be upfront about fees. Normally, the fee is a minimal percentage of the value of each invoice. Application or collection fees may apply as well. Again, a reputable factoring company will be upfront about any related fees.
If you’re an owner-operator working as a driver and also handling the books, let’s take a closer look at how factoring works. While each factoring company may operate differently to some extent, the process typically involves:
Maintaining steady cash flow is important for anyone in the trucking business. If you’re an owner-operator, this means you’ll need to be mindful of both the requirements that go along with driving and the back-end “stuff” involving payments. But payments being received don’t always come in on a consistent and regular basis. In fact, it’s not unusual to wait for weeks or even months to receive some payments after everything has been delivered as agreed upon.
Having to put up with this pacing can be cost-prohibitive for some owner-operators and trucking companies. It can also slow growth or contribute to other financial strains and stresses. If you’re a new truck driver working as an owner-operator, you’ll also be able to spend less time contacting clients and keeping track of payments received with factoring and more time cultivating new clients and delivering loads.
As with anything, factoring too has pros and cons to consider.
Freight factoring can be beneficial to both owner-operators and established trucking companies. This is because trucking factoring allows a trucking company to maintain a consistent pay schedule for its employees. This is ultimately good for truck drivers looking to make a decent living without having to be overly concerned about payment delays or imbalances. And it’s good for the trucking company because it eliminates worry and helps with driver retention.
We hope that with this guide you have gained a better understanding of how freight factoring works and what it can mean to you. Feel free to pass this factoring guide along to anyone considering becoming a new trucker or owner-operator. Also, check out this page to see reasons to factor with us and why many many truck drivers and trucking companies have trusted over the years. Click here to fill a simple form and sign up with us today.