What Is Freight Factoring — And Should You Be Using It?
In the trucking industry, waiting 30, 60, or even 90 days to get paid for a delivered load can strain your cash flow. Freight factoring offers a solution by turning your unpaid invoices into immediate cash, ensuring you have the funds needed to keep your operations running smoothly.
Understanding Freight Factoring
Freight factoring, also known as invoice factoring, is a financial service where a trucking company sells its unpaid invoices to a factoring company at a discount. In return, the factoring company provides immediate payment, often within 24 hours, and takes over the responsibility of collecting payment from the broker or shipper .
How GAP Factoring Works
GAP Factoring, based in Twin Falls, Idaho, specializes in freight factoring services tailored for carriers. Here’s how their process works:
- Submit Load Paperwork: After delivering a load, you send the necessary documentation, such as the bill of lading and rate confirmation, to GAP Factoring.
- Verification: GAP Factoring verifies the paperwork and the creditworthiness of the broker or shipper.
- Receive Payment: Once verified, GAP Factoring advances you a significant percentage of the invoice amount, often within the same day.
- Collection: GAP Factoring then collects the full payment from the broker or shipper, handling all the follow-up and administrative tasks.
Benefits of Using GAP Factoring
- Improved Cash Flow: Immediate payment allows you to cover fuel, maintenance, and other operational expenses without delay.
- Back-Office Support: GAP Factoring handles invoicing and collections, reducing your administrative workload.
- Credit Checks: They provide credit checks on brokers and shippers, helping you make informed decisions about whom to work with.
- No Hidden Fees: GAP Factoring offers transparent terms with competitive rates, ensuring you know exactly what to expect.
Is Freight Factoring Right for You?
Freight factoring is particularly beneficial for:
- Owner-Operators and Small Fleets: Who may not have the financial cushion to wait for extended payment terms.
- Companies Experiencing Rapid Growth: Needing consistent cash flow to scale operations.
- Businesses Seeking Administrative Relief: Looking to outsource invoicing and collections.
However, it’s essential to consider the cost of factoring, as fees will reduce your overall profit margin. Ensure that the benefits, such as improved cash flow and administrative support, outweigh the costs for your specific situation.
Conclusion
Freight factoring can be a valuable tool for trucking companies seeking to stabilize cash flow and reduce administrative burdens. GAP Factoring offers tailored services that provide immediate payment, credit checks, and back-office support, helping you focus on what you do best—keeping your trucks on the road.
If you’re considering freight factoring, reach out to GAP Factoring to learn how their services can support your business needs