What Is Freight Factoring?

Cash flow is often a challenge for trucking or freight businesses. The amount of cash entering your business is affected by seasons, the state of the economy, the price of fuel, how quickly your customers pay invoices, and countless other elements you can’t control. Freight factoring is a type of financing that can help you generate more consistent cash flow.

What Is Freight? 

In the trucking industry, freight refers to the goods or cargo that are transported by trucks from one location to another. This can include a wide variety of items, such as consumer goods, raw materials, machinery, and even livestock. Freight is typically transported in containers or trailers that are loaded onto trucks and then transported over long distances using highways and other roads throughout the country. The term “freight” is also used to refer to the charges or fees that are associated with the transportation of goods by truck. These fees are typically paid by the shipper or consignee and may vary depending on the weight and type of the goods being transported, as well as the distance traveled and the delivery time frame.

What Is Freight Factoring?

The average length of time for invoices in the transportation industry to be paid is 40 days. In some cases, this can get stretched out even longer. Freight factoring, also called truck factoring, is a practice that lets you get paid immediately for invoices that might otherwise take your customers a month or longer to pay. You essentially sell your invoices to a third-party company that specializes in factoring. In exchange for a small fee, you get the benefit of collecting payment on your invoices much faster than normal.

What Do Freight Factoring Companies Do?

Factoring companies often work with businesses in many industries, though the practice is extremely common in trucking and other transportation companies. The factoring company offers financial services that involve buying a business’s unpaid invoices at a discount and handling the collection process.

How Does Freight Factoring Work?

Here are the main steps involved in factoring:

1. You deliver freight to your customers as usual.
2. Submit the invoice to the factoring company rather than the customer. You can choose which invoices you want to factor.
3. You receive a cash advance of up to 95% of the invoice’s face value. Rates depend on the company’s policies and industry.
4. Your customer pays the factoring company.
5. You are paid the remainder of the invoice’s value with a factoring fee deducted.

How Can You Benefit From Freight Factoring?

There are many benefits for a trucking or freight company to use freight factoring. Here are some of the most popular ways transportation companies can be helped by factoring their freight invoices.

• Meet business expenses more easily. Cash flow problems can make it challenging to meet payroll and pay your other expenses. Factoring ensures you’ll always have sufficient cash on hand.
• Expand your business. You can invest in more trucks, employees, and equipment to scale up your operations.
• Spend less time on collections. Since the invoices you factor are paid to the factoring company directly, you’ll save time on collections.
• Finance your business without harming your credit. Borrowing money means taking on more debt. Factoring is a distinct type of financing that is not a loan, so your credit is not impacted.
• Get credit checks on your customers. Factoring companies check your customers’ credit rather than yours. This makes it easier for you to qualify. It also means you get valuable knowledge about your customers’ reliability.

What Do You Need to Qualify For Factoring?

If you want to apply for factoring, the process is quite simple compared to applying for traditional financing such as bank loans. You will need to provide the following documents:

• Proof of identity.
• A tax ID or EIN (Employer Identification Number).
• DBA or corporate documents that establish you are a legal business entity.
• Invoices from paying customers.

Why Choose Riviera Finance?

Riviera Finance offers a full range of financing options for businesses, including freight factoring. Here are some of the main reasons so many customers use Riviera.

• Experience and stability. Riviera has been serving businesses since 1969.
• Maximum cash advances. Our advances are the highest in the industry.
• Convenience. You have 24/7 access to your accounts.
• Personalized solutions. We’ll identify your needs and find a customized solution.

To learn more about how freight factoring can benefit your business, contact Riviera Finance today.