Trucking Invoice Factoring

Get quick working capital through an easy process

WHAT'S IN THIS GUIDE

1. What is Trucking Invoice Factoring?
2. Is Factoring Worth It For Trucking?
3. How Does Invoice Factoring Work in Trucking?
4. What Are the Benefits of Invoice Factoring For Trucking?
5. What is a Good Factoring Rate in Trucking?
6. How Do I Qualify for Factoring for Truckers?
7. How to Choose the Best Factoring Company for Truckers?
8. Truck Factoring vs. Bank Financing
Trucking Invoice Factoring FAQs

Whether you’re an owner-operator or a large trucking company, you face many challenges every day, from managing a fleet of drivers and vehicles to navigating customer demand and ever-changing regulations. But one issue that affects trucking businesses the most is cash flow.

A health balance of incoming and outgoing funds is essential for the survival of any business. In fact, 82% of small businesses fail due to poor cash flow. And the trucking industry has its own set of challenges when it comes to steady, consistent revenue.

Access to steady liquidity can be difficult when customer payments are slow or delayed, leaving truckers with limited options for staying afloat. Constant cash outflows from rising fuel costs, fleet maintenance, and driver payroll add up quickly. Combined with long payment terms, the cash flow gaps take your time and resources away from growth opportunities. And with many trucking companies still recovering from the pandemic’s effects on their business—a time when late payments were up 500%—cash flow is more important than ever.

Fortunately, there are ways to close this gap and foster steady cash flow. Invoice factoring allows trucking companies to access much-needed capital in exchange for their outstanding invoices. This funding method provides an efficient way for trucking companies to manage their finances so they can scale their business.

What is Factoring in Trucking?

Factoring in trucking involves selling your unpaid invoices, also known as accounts receivable, to a factoring company (or invoice factor) at a discount to receive payment faster. The factor gives you working capital for your invoices in days, less a fee, and waits for your customer to pay on net terms. When you work with factoring companies for truckers you no longer have to wait for months to get paid.

Small- and medium-sized trucking companies that may qualify for freight factoring services include freight brokers, trucking fleets, professional services, owner-operators, companies with 1-5 trucks, semi-trucks, freight businesses, dump truck haulers, large transportation fleets, over-the-road operators, single drivers, and more.

Is Factoring Worth It For Trucking?

It depends on your situation. You’ll need to evaluate:

  • How fast you need working capital. Do you need it in days, or can you wait weeks or months?
  • How critical the reason for needing working capital is. Do you need it because you won’t make payroll without it? Or because you don’t want to miss out on a big growth opportunity?
  • Your other funding options. Are you already qualified with a bank or peer-to-peer lending network? Are you too new to get traditional funding through banks?

 

All of these questions will help you determine if invoice factoring is worth it. The company you work with also makes a big difference in the value you get from factoring. 

How Does Invoice Factoring Work in Trucking?

Invoice factoring is a simple process. Here’s how it works in 4 easy steps:

  1. A trucking company applies for funding and submits the invoices it would like to get paid.
  2. The factoring company verifies information about the trucking company and its customers’ information—such as liens, if the invoice has been accepted, credit checks, and other critical details.
  3. The factoring company offers pays the invoice to the trucking company, often just one day after approval
  4. The factoring company waits for the trucking company’s customer to pay. See how we at FundThrough works with your customers if this part of factoring concerns you. 

This can provide valuable financial stability and the ability to take on growth projects for truckers.

Invoice Trucking Example: How Does Factoring Work in Trucking?

One of the most common reasons for trucking companies to seek invoice factoring is payroll, so let’s use that as an example. A trucking company needs to make payroll for their fleet and pay for gasoline and vehicle maintenance—but there may not be not enough cash for all of these expenses. Without access to immediate capital, the business could be stuck in a cash crunch.

Invoice factoring ensures that trucking companies have the capital they need to continue operations. For example, let’s say that a trucking company has $100k in outstanding invoices and they need cash for payroll ASAP. They apply for funding with FundThrough and get funded $97,250 in just a few days, at the discounted rate of 2.75% for 30 days.

By factoring their invoices, they can get the funds they need quickly so they can keep their drivers on the road. In this way, invoice factoring helps truckers maintain their operations and manage cash flow more effectively.

Factoring for Trucking Companies: What are the Benefits?

There are many reasons factoring for trucking companies is a popular way to get financing – here are a few our trucking company clients seem to appreciate the most from our experience:

  • Easy approval: You may have difficulty obtaining traditional financing if your business is new or has a less-than-perfect credit rating. Banks often require an excellent credit rating and minimum annual revenue requirements, and in some cases, collateral. And after going through the hassle of applying for bank financing, you still might get rejected – even if you’re trying to raise the limit on an existing line of credit. Invoice factoring can provide quick relief without needing a great credit score.
  • Get funded in days: Invoice factoring offers quick funding, often within 24-72 hours, making it an ideal solution for trucking companies looking to access working capital without waiting weeks or months for a loan from a bank. With invoice factoring, truckers can get the money they need, when they need it.
  • Flexibility: Trucking companies can access funding almost immediately, any time they need it, whether for emergency repairs, major contracts that could help grow their business, or other cash flow needs. It’s funding on demand.
  • Non-dilutive funding: Invoice factoring is also non-dilutive funding, meaning that it does not require truckers to give up any part of their company or equity in exchange for capital.
  • No debt: Another significant benefit to factoring is that trucking companies can tap into the consistent cash flow they need without taking on any additional debt, since your customer pays their invoice instead of you having to pay back the balance.

 

With the cash advance you get from your outstanding invoices you can pay for common expenses such as:

 

  • Fuel and fuel cards
  • Insurance
  • Payments on your truck(s)
  • Payroll
  • Office expenses
  • Parking expenses
  • Marketing expenses
  • Utility costs
  • Training costs
  • Broker fees
  • Miscellaneous expenses

Truck Factoring Rates: What is a Good Factoring Rate in Trucking?

Many factoring companies charge between 1% and 6% for their discount rate, or the fee they keep from your invoice. A good factoring rate will be somewhere between these two numbers, and importantly, that should be the only fee you pay. Sometimes, a really low discount rate means hidden fees will be added to your total cost. There are two main types of freight factoring rates for trucking companies:

  • Flat factoring rates: Here, the factor charges a fixed rate no matter how long the net terms are or the size of the invoice.
  • Variable factoring rates: Conversely, variable rates, sometimes called tiered rates, mean that the cost of factoring each invoice varies mostly based on how quickly your customers pay their invoices. E.g., you pay a different rate for 30 day net terms vs 60 day net terms

 

See FundThrough’s pricing page for what you could expect to pay for funding invoices with us.

Factoring for Truckers: How Do I Qualify?

All factoring have their own requirements for qualifying, but here are a few common ones:

  • You operate as a B2B business and invoice other businesses
  • A valid business license and operational permit
  • A monthly minimum revenue requirement
  • Creditworthy customers
  • You are located in a country the factoring company works in
  • No liens (although many companies, like FundThrough, can often still work with you if you have liens.)
  • No unmanaged tax balance (FundThrough works companies on payment plans with the IRS and CRA all the time.)
  • A business bank account in good standing
  • Documentation of the invoices being factored.

 

Here are a few of the documents you’ll likely need to have ready:

 

  • Business formation documents: This would include items such as LLC Certificates and Articles of Incorporation.
  • Government-issued ID: Examples include a passport or a driver’s license.
  • Tax ID: You’ll need to authorize the factoring company to check your business’s tax history. 

Factoring Company for Truckers: How to Choose the Best Option

  • Professional approach to your customers: You need a partner who will not hound your clients for payment, so be sure to ask how the factoring company works with your clients, especially in the event of a late payment. Here’s how we treat your clients like our own.
  • Factoring Flexibility: Reputable factoring companies should allow you to factor your invoice the way you want. This means you should be able to factor the invoices you choose at any time – no long-term contracts forcing you to fund all the invoices for a certain customer and no minimum monthly funding requirements.
  • Fee Transparency: You should be able to see not just your factoring fee, but your total factoring cost before agreeing to the funding. This is because in addition to the invoice factoring companies discount rate (the percentage they keep from your invoice), they can also charge hidden fees like application fees and service charges. Be sure to ask about these when evaluating factoring companies. (We don’t charge any fees beyond the discount rate at FundThrough.)
  • High advance Rates: Since invoice financing is a solution for cash flow bottlenecks, you want to make sure that you’re getting as much cash as possible. Many factoring companies advance 80 to 85% of your invoice and pay the rest back, less their fee, when your client pays the invoice. Others have more competitive rates and can advance you 100% of your invoice (like FundThrough!)
  • Easy process. A quality freight factoring process should be quick and easy to complete so you can get back to business. Ask any company you’re considering about their process: is it manual and paper-based? FundThrough’s approach to this is to use technology – specifically AI, automation, and integrations with QuickBooks and OpenInvoice – so that you can get set-up without a headache and submit invoices for funding in one-click once you’re onboarded.
  • Dedicated customer service. You should be able to have an account manager help you through your first funding and beyond while getting to know you and your business.

 

Trucking Factoring vs Bank Financing

There are several differences between invoice factoring and bank financing that trucking businesses and transportation companies should be aware of before applying:

The Benefits of Factoring Over Bank Financing:

  • Easier application and approval process
  • No need for a stellar credit history or minimum annual revenue requirements
  • No collateral required as the invoice itself acts as security for funding
  • Faster payment time with advances often available within days
  • Scalable funding solutions tailored to individual businesses
  • Less of your valuable time spent following-up on invoices
  • No long-term contracts, depending on the factoring company

 

The Downsides of Factoring Over Bank Financing:

  • Higher fees than a traditional bank loan
  • Possible damage to customer relationships if the factoring company is not reputable. (Again, see our approach since we understand how important this is.)
  • Can be hard to record in your bookkeeping. See our step-by-step instructions for help.

Trucking Invoice Factoring FAQs

Your questions answered.

It depends on the freight factoring company and the period of time the invoice remains unpaid. But fees can be as low as 1% and as high as 5% or more. FundThrough has a transparent pricing structure so you always know your rate before you factor an invoice. At FundThrough, you’ll find options that help small businesses meet their financial goals.

Generally, no. Many trucking factoring companies have contracts that don’t allow this to limit their risk.

Yes. It matters that the factor you choose to work with understands and has knowledge in your business. They can help you get the funding you need quicker and easier if they have an ongoing relationship with you and understand your goals. (At FundThrough, we’re familiar with trucking factoring.)

A factoring company in trucking is a business that provides financing solutions to trucking and transport companies by purchasing and collecting on their invoices. By doing so, reliable factoring companies can provide fast access to capital without long processing times. This type of funding enables truckers to maintain positive cash flow more efficiently and have the financial stability they need to run and grow their business.

Simple. Intuitive. Trucking Invoice Factoring.

Built for Your Business

Explore fast payments with an experienced fintech

Interested in possibly embedding FundThrough in your platform? Let’s connect!