2018 was a banner year for the American economy. The U.S. GDP rose 3.5% in the third quarter, and 4.2% in the second, and because the economy was firing on all cylinders, consumers spent more and companies invested in more inventory, according to Fortune. This increase meant that trucking companies delivered more loads and took on more contracts.
However, the B.E.A. and other authorities are implying that growth of that level is not sustainable, and that we can expect a major slowdown in 2019. While it doesn’t look like the U.S. will enter a recession, economic forecasts don’t look promising.
As business slows down in the trucking industry, carriers need to be more conscious than ever of overhead costs and how to keep steady cash flow.
Transportation factoring has been gaining in popularity as a way to finance a growing trucking business, and this will be truer in 2019 than ever before. Because customers in the trucking industry are sometimes very slow in paying for services rendered, trucking companies often have to wait 30 to 60 to 90 days for payment.
Many startups, and small- to medium-sized carriers struggle to handle this payment delay. Everything from payroll to taxes to fuel needs to be paid right away, and waiting up to three months for payment on a delivery you’ve already made can bring your business to a grinding halt.
In this article, we lay out the top 4 benefits that transportation factoring brings to trucking businesses of any size.
Benefit #1: Factoring improves your cash flow
The most obvious benefit of transportation factoring is that by selling your unpaid invoices at a discount for upfront cash from a third-party factoring company, you can improve cash flow, allowing carriers to better handle short-term expenses. More importantly, it also enables carriers to make long-term investments to help grow their business.
Benefit #2: Factoring helps increase sales volumes
Factoring your invoices also helps you increase sales, because waiting to get paid for jobs you’ve already completed will no longer force you to turn away new clients. Check this out — by selling the invoices of slow paying customers upfront at a discount, those invoices are no longer elements that limit your ability to grow. Instead you can use them as a resource to help you build forward momentum.
Benefit #3: Quick and easy approval
Unlike a bank loan, which can be a slow, arduous process often resulting in refusal, factoring comes with a far more generous approval process. Factoring companies review applications for funding based in part on the ability of your customers to pay their bills in a timely fashion, which means that you can still be approved for funding even if you have less-than-stellar credit as a carrier.
Benefit #4: Factoring comes with value-added perks
Top tier factoring companies — like Accutrac Capital, to give just one example — offer back-office support through professional A.R. management, which means you no longer have to focus on tracking down payments yourself.
As part of their suite of services, factoring companies will also offer you risk mitigation through unlimited commercial credit checks on current and prospective clients, a service that allows you to offer the most strategic terms because you can choose to deliver only for companies with a low chance of defaulting.
The best companies will also provide other cost saving value-added services including:
- Cash Advance B4 Delivery
- Preferred Currency Exchange Rates
- Equipment Financing
- Discount Fuel Cards
If you deal in receivables from customers with solid credit, a factoring company can help you navigate 2019’s economic waters with funding options to help you cover day to day costs such as fleet maintenance, fuel, salaries, and other overhead costs while also providing a bevvy of value-added benefits. Capitalize on the benefits of transportation factoring today to get your fleet moving.