Sitting on a stack of unpaid invoices makes it difficult to meet these obligations. Truck payments, fuel, maintenance, insurance, taxes and salaries for other drivers are necessary expenditures, and most can’t be put off. Instead of waiting several months to receive pay for deliveries, or take out a loan, many trucking companies find it more convenient to simply sell invoices to a factor, and then the money they are owed–minus a small percentage taken by the factor–can arrive in as little as 24 hours, depending on the timeline set by the invoice factoring company.Ĭarriers often need to spend money to make money. Invoice factoring helps truckers get paid quickly in a business where cash flow can be a challenge because the timing of payments often depend on elements outside the carrier’s control. Invoice factoring refers to the actual sale of the invoice to another party. Invoice factoring is distinctly different from taking out a loan or borrowing against accounts receivable, which is known as invoice financing. The factoring company, or factor, then collects on the outstanding invoice. Among the various types of receivables finance is invoice factoring, which means the trucker sells his or her accounts receivable invoice to a factoring company in exchange for cash. These financial products are known as receivables finance. Truckers sometimes pursue financing options that use accounts receivable–or the remittance they are owed for completing a job– as the primary source of collateral. Invoice factoring is a specialty financing tool that trucking businesses and freight brokers can use to maintain cash flow. Carriers should consider factoring a “buyer beware” situation, and learn all they can about the benefits and potential downsides, using this guide and other information sources, before signing an agreement with a factoring company. But while this type of financing is convenient–and for many trucking companies a necessity–invoice factoring can also include hidden costs and other pitfalls every trucker should be aware of. And while receivables finance takes various forms, a popular option in the trucking industry is invoice factoring, where the carrier sells unpaid invoices to an invoice factoring company, which in turn collects payment from the shipper or broker. Reluctant to take out a loan because of interest payments and the debt on the company balance sheet, many carriers choose receivables finance–or using unpaid invoices as collateral–to get through the lean times. Many carriers haven’t been in business long enough to establish a credit history and qualify for credit financing. This can leave many trucking companies, especially new or cash-strapped operators, in a temporary bind. Shippers pay brokers according to their own schedules, and brokers later send payment to carriers. But truckers are often last in line to get paid. And when it comes to fuel, maintenance, insurance and other necessities, paying these bills without delay is the only way to keep trucks on the road. ![]() Carriers in the trucking industry often have to spend money to make money.
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