Invoice Factoring in a Down Economy

With many trucking companies feeling the cash flow squeeze in these tough economic conditions, large numbers of trucking companies are turning to invoice factoring, or freight bill factoring, as a way to improve their cash flow. Invoice factoring has many advantages over traditional bank financing, and I will discuss just a few of these advantages in this article.

First, by factoring their freight bills, trucking operators do not need to go through the hassle of filling out loan applications at their bank only to be told that they don’t qualify. Although most factoring companies have an application form, it is generally shorter and easier to complete than a bank loan application.

The next advantage to factoring is the speed with which a trucking company can obtain cash. Since cash is the life blood of every trucking operation, having a stable, steady cash flow is critical to ensure long-term success of the business. Most factors can review and approve an application in 24-48 hours. Additionally, once approved, a factor can purchase a freight bill and get cash into the trucking company’s bank account in 24 hours or less. The application and funding turnaround time is generally significantly shorter with a factor than with a bank.

The final advantage to invoice factoring I want to touch on is credit worthiness. Unlike a traditional bank loan, factoring is not dependent on the trucking company’s credit worthiness, but rather the credit worthiness of the customers or debtors paying the invoices. If a trucking company does business with financially solid, reputable businesses, factoring companies should have no problem buying the trucking company’s freight bills.

Freight bill factoring can provide a trucking company with the cash it needs to cover its day to day expenses such as fuel, insurance and payroll. And while it may not be considered a traditional method of financing, factoring has been around for hundreds of years and is a financial tool trucking companies should not rule out.