As the owner of a trucking company, you might feel like you’re playing a constant waiting game when it comes to being paid. Receiving payment for an invoice may take weeks, even months. Unpaid freight bills can wreak havoc on your cash flow and limit your business’s growth, which may have you wondering whether trucking factoring companies can help.
Trucking factoring companies—also known as freight factoring companies—give you an advance on your outstanding invoices, and they collect the payment from your customer when the invoice is due. Additionally, trucking factoring companies can often take the risk of nonpayment off your shoulders—for a price.
The best all-around trucking factoring companies are:
Finding the best factoring company for your trucking business is key, especially since most truckers develop a long-term relationship with the trucking factoring company they choose to work with.
Chances are, once you find the right trucking factoring company, you’ll factor multiple invoices with them. Trucking factoring companies are also different in terms of price, so comparison shopping is important for getting the best deal.
Here’s your ultimate guide to finding the best factoring company for your trucking business:
Trucking factoring companies are financial third parties who will buy your business’s accounts receivables at a discount. After they buy the invoice, the invoice belongs to them. This means that the factoring company will chase down the customer for their invoice payment.
An unpaid invoice shouldn’t mean that you can’t afford to pay your employees or make rent this month. Truck factoring—more generally known as factoring or invoice financing—helps small businesses better manage their cash flow.
One important distinction you’ll come across when comparing trucking financing companies is recourse versus non-recourse factoring.
Recourse factoring is similar to a personal guarantee that your customer will pay the invoice. If your customer ultimately doesn’t pay, you’re on the hook to pay the factoring company. To avoid this problem, if you opt for recourse factoring, make sure you’re hauling goods only for clients who have a good commercial credit history.
With non-recourse factoring, you’re off the hook if your customer doesn’t pay the invoice. If the customer is late to pay the invoice or doesn’t pay at all, the factoring company accepts the risk. Naturally, this is what most small business owners would prefer, but non-recourse factoring costs more than recourse factoring.
The trucking factoring industry has changed a lot over the last several years. Truck factors used to be known for unsavory collection practices, and many truckers avoided this form of financing to safeguard their customer relationships. Fortunately, many newer freight factoring companies are placing much more control in the hands of small businesses like your’s. They also offer more flexibility of financing and better prices.
Here are the four best factoring financing companies for trucking businesses.
The online lender BlueVine is one of the very best factoring companies out there. This factoring company provides account receivable factoring that is automated and intuitive. If you use accounting software like QuickBooks, Xero, or Freshbooks, you can sync your BlueVine dashboard with your online accounting and handpick invoices that you want to factor. The turnaround time for factoring is just one day or less.
BlueVine is not your traditional invoice factor. They are not purchasing your receivables. Plus, they won’t get involved in payment collection or chase down your customers for payment. They leave payment collection up to you, and you’re responsible if your client doesn’t pay up.
If you decide to go with BlueVine, you’ll receive initial advance rates of 85% to 90% of your invoice value, ranging from $5,000 to $5 million. With BlueVine, your term will be based on your invoice payment term, and it can range anywhere from 1 to 12 weeks long.
BlueVine charges a weekly discount rate of 1% for every week that your invoice is outstanding. You can qualify for better rates if you are a repeat customer or are factoring more than $30,000 per month.
To qualify for BlueVine, you need a credit score of 530, 3 months in business, and $100,000 in annual revenue.
Another great option among trucking factoring companies is Fundbox. In reality, Fundbox is more of a lender, and less of a factor. They don’t purchase your receivables, but will lend you money based on the value of your invoices.
Similar to BlueVine, you can just plug in your accounting or invoicing software. Fundbox will then pull up your invoices, and you can choose which ones you’d like to factor. They will loan you 100% of your invoice’s face value, and you repay the amount over 12 or 24 weeks.
Fundbox provides only $100 to $100,000 in funding, not quite as much as BlueVine. However, they are less expensive than BlueVine. Fundbox’s fees start at 4.66% of the draw amount for 12-week repayment and 8.99% for 24-week repayment, but the fees can go up from there depending on your customers’ creditworthiness.
To qualify for Fundbox, you only need to have three months of activity in online accounting or bookkeeping software. There are no credit score or revenue minimums. Fundbox doesn’t require a personal guarantee for their factoring product, essentially making them a non-recourse factor. However, they don’t get involved in payment collection.
TBS Factoring is a popular freight factoring company that offers both recourse and non-recourse factoring. Unlike BlueVine, who works with a wide variety of businesses, TBS only works with trucking companies. The non-recourse option, as you might guess, is costlier than the recourse option. But the fact that you have a choice might make this more attractive than BlueVine for some truckers.
Another advantage of TBS is that they will give you a 100% advance on your invoice, without holding onto a reserve amount. Their rates start at 1.25% per week, which doesn’t put them too far off from BlueVine in terms of cost, at least for the recourse product. The non-recourse product is more expensive.
Qualifying for TBS is relatively easy. There’s no credit score minimum, no monthly factoring minimums, and even new businesses are eligible. They even offer additional perks for trucking companies, such as fuel cards and free credit checks on customers to be sure you’re choosing the right hauls.
TBS will save you some additional time compared to Fundbox and BlueVine as well, because they play an active role in the collections process. They will contact your customers by phone or email to collect payment of the invoice on time. While some customers might like the convenience this offers, other don’t like the disruption this can cause to customer relationships.
Apex Capital is another popular factoring company for trucking businesses. They have specialized in truck factoring for small and medium-sized trucking businesses for over 2o years. And Apex Capital has worked with one-person owner-operators as well as large trucking fleets.
Like TBS Factoring, Apex Capital also offers recourse factoring and a higher-cost non-recourse option. They don’t require any long term contracts or monthly minimum volumes. The weekly rate starts at 2%, making them slightly costlier than TBS Factoring and BlueVine.
Apex Capital can advance your invoice really fast—the next day or the same day even. This factoring company also offers fuel cards and other benefits to their customers. Although Apex Capital doesn’t list qualification requirements on their website, qualifying should be relatively easy as they work with a variety of businesses.
For some trucking companies, the downsides to trucking factoring can be deal breakers. Some companies prefer a more traditional method of semi truck financing—a loan or line of credit. Luckily, there are other ways for trucking companies to get capital.
Short-term loans and lines of credit share many similarities with freight factoring. All are quick sources of capital, are relatively easy to qualify for, and are designed to be paid back within a short period of time. The difference, of course, is that the invoices always remain on your books. The lender won’t purchase your receivables.
With a short-term loan, you get a fixed amount of capital that you can use as working capital while waiting for your customers to pay their invoices. Then, you have to pay back the lender in 3 to 18 months.
Short-term lines of credit offer even greater flexibility. You get access to a certain amount of money, and that becomes your credit line. You can draw money from your credit line as needed and only have to pay interest on what you draw. This is a great option for trucking companies that face a variable cash shortage while waiting for freight bill payments to come through. If you know you’ll have a need for capital but are unsure how much, a line of credit is a nice option.
Trucking companies hauled over $52 billion worth of goods in 2015! But trucking companies don’t always reap the benefits of their hard work right away. Sometimes, they are left waiting 30, 60, even 90 days, to receive payment from a client.
For these types of businesses, trucking factoring companies can be a great fit. Changes in the industry have made truck factoring a viable option for small owner-operators as well as large trucking fleets. With options like BlueVine and Fundbox, you can get essential capital, without having to worry about a factoring company intruding on your customer relationships.