For companies big or small, a freight payment service can provide assistance with cash flow through freight financing. Partnering with a factoring company should help carriers experience fewer delays in receiving payment and also shorten the payment clock. As the trucking industry continues to expand, companies must find options to gain a competitive advantage...and freight factoring can provide that advantage.
What Do Transportation and Freight Finance Mean?
Transportation finance can provide businesses a way to release working capital that might otherwise remain tied up in invoices for a long period of time. After hauling a load, carriers will submit paperwork to a factoring company rather than a broker. The broker will then pay the factoring company for the invoice in roughly 15 to 30 days. Freight factoring allows for carriers to receive payment instantly rather than waiting for the average 30 to 90 days most shippers take.
Using freight factoring can address the problems of slow-paying shippers by buying the invoices and paying the carrier within a day or two. Receiving payments sooner can increase cash flow and allow the carrier to pay operational costs.
A Brief History of Freight Financing
After World War II and the expansion of highway systems in the United States and Canada, the trucking industry had the opportunity to expand. This expansion allowed a surge in freight transportation that prompted funding for transportation companies and freight factoring to begin. Throughout the ‘60s,70s, and ‘80s the trucking industry continued to evolve and become a vital part of society.
As advancements continued and deregulation occurred, the number of trucking companies in operation increased drastically. More competition led to increases in volumes, freight rates, and interest rates for the companies to secure financial backing. Throughout the decades, and especially in the most recent past, freight financing continues to grow and become a leading financial strategy.
How Freight Finance Improves Working Capital
The trucking industry faces challenges with freight capital due to the prolonged payment period shippers need. Observing the continuous growth in the market and how freight financing can help free up working capital, Grand View Research mentions, “Significant growth in the Banking, Financial Services, and Insurance (BFSI) industry is considered a key factor in developing a positive impact on the market growth. Moreover, the growing requirement for alternative sources of financing for Micro, Small, and Medium Enterprises (MSME) is driving the market growth. Factoring services enable businesses to obtain working capital loans and mitigate credit risks.”
To gain access to revenue and build freight capital, companies in the trucking industry continue to use freight factoring. Transportation factoring can create immediate cash flow for a business and maximize the working capital without creating more debt.
What to Look for in a Finance Provider
Working with the wrong factoring company can cause a negative effect on a company’s cash flow and operations. When deciding on the best freight financing business to partner with, make sure the business can provide:
- Advanced technology, including a digital software platform to simplify the payment process.
- A platform that can streamline document management and automate invoicing and paperwork. This will allow for faster processing.
- In-depth knowledge and expertise of the trucking industry. The potential partner must be able to demonstrate they are up-to-date on market trends.
- Top-of-the-line customer service, with proactive communication strategies and the ability to respond quickly.
- Transparency with fees, contracts, rates, and can meet expectations without minimum volume requirements.
Boost Your Finance Goals With the Right Solution
Partnering with the best transportation finance company can provide solutions for when shippers are prolonging the payment process. Factoring can provide a variety of benefits, including increased cash flow, overall business growth, advancements in technology, and the ability to reduce the stress associated with back-office tasks. To see these benefits and learn more about how they might impact your business, request a demo of the HaulPay platform, a creation by industry finance expert ComFreight.