Freight factoring (aka trucking factoring) is a sort of bill factoring that enables trucking companies, including owner-operators, to flip unpaid invoices into immediate cash. It’s typical for a trucking company to utilize cargo lien to pay cash flow gaps while they wait to get compensated by shippers or freight agents.
If you’re trying to find a freight factoring company and send out at least $50k of invoices a month, look into TCI Business Capital. Their advance rate of 90 percent and reduction rates of 1-4% are extremely competitive. Their customers get invoices financed in 1 day. Strong applicants could be accepted with TCI in approximately 1 week.
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What Freight Factoring Is
Freight leasing, aka freight invoice factoring and trucking factoring, is an account receivable financing option that can market your outstanding invoices by getting you paid immediately for work you have already completed. The factoring company will normally cover you 80-90% of the value of your outstanding invoice up front, then pay you the rest of the balance, with no fees, once your customer pays off the invoice.
Freight factoring is beneficial to both small owner-operators seeking to get paid instantly to take on additional work, and also for bigger trucking companies seeking to fill a cash flow gap. It’s also a wonderful way to find financing if you are not a prime debtor. You’re able to qualify depending on the creditworthiness of your customers instead of your own. Borrowers with bad credit may find this to be their cheapest working capital financing option.
Typically, cargo lien will carry unique conditions and credentials based on how much factoring you need. Larger trucking companies who do $30K+ per month at invoice volume will typically seek different partners compared to smaller owner-operators doing less than $30K. Our comparisons during this article will take both kinds of companies into consideration.
The table below reflects industry standard terms, prices, and credentials of cargo factoring for trucking companies of all sizes.
Freight Factoring Qualifications, Requirements, & Costs at a Glance
| High Volume Factoring > $30K per Month |
Low Volume Factoring < $30K per Month |
|
|---|---|---|
| Amount You Can Borrow | $30K – $20 Million a month | $1K – $100K monthly |
| Common Qualifications | 2+ years in company Outstanding Invoices because in the next 90 days |
3-6+ Months in company Outstanding Invoices because in the next 90 days |
| Advance Rate | 80% – 90% | 85% – 100% |
| Discount Rate | 0.5% – 5% per statement | 2% – 5% each month |
| Time to Qualify | 2-7 Days | 1-2 Days |
| Time to Receive Funds | 1 Day | 1 Day |
If you’re unfamiliar with invoice factoring in general, then you may learn more by checking our all-inclusive guides. For big trucking companies you should learn about bill factoring, however smaller businesses or owner-operators should start looking into accounts receivable financing, which is similar but operates slightly different and is for smaller factoring needs.
TCI Business Capital provides an improvement rate of around 90% and discount prices of 1-4 percent. If you’re doing more than 50k in invoicing each month, you may qualify. Qualified borrowers can be approved with TCI in approximately 1 week and start getting paid on bills in about 24 hours.
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Who’s Freight Factoring Is Ideal For
Freight factoring is a good fit for trucking companies of all sizes looking to outsource their accounts receivables feature, or businesses seeking to get paid immediately on outstanding invoices to fulfill a difference in cash flow. Depending on how big your trucking business, you’ll typically have distinct aims in mind, and freight factoring will gain you in different ways.
“The 1-rig owner-operator is usually searching for cash flow help. A larger firm is searching for efficiency, since when cash flow isn’t an issue, focus on continuing growth typically is. Either size company may find the balance in freight factoring of not having to deal with the communication, payments, and reporting that goes along with internal operations very attractive.”
— Amy Van Ness, Controller at FreightCenter
Freight Factoring Qualifications
Qualifying for cargo lien (sometimes referred to as trucking factoring) is a lot easier than attempting to be eligible for a conventional business loan from the lender, or some other long term funding. The typical hurdles you frequently see with long-term funding, like being a prime debtor, practically vanish with cargo factoring. Factoring companies are more interested in your client’s charge over yours, as they’re those repaying the loan, or progress, they’re giving you.
If you’re an owner-operator doing less than $30K in monthly earnings, then you certainly can typically qualify for cargo lien by having:
- A 530+ Credit score (assess your credit score for free)
- Outstanding invoices due from the next 90 days
- 3-6+ Months of business history
If you are a bigger trucking company seeking to variable $30K+ each month, and then you could qualify for traditional bill factoring, which can be a long-lasting partnership with your factoring company. The credentials are generally:
- Creditworthy customers (their credit rating may be pulled)
- Outstanding invoices due from the next 90 days
- 2+ Years of business history
Freight Factoring Costs
The general price of freight bill factoring for owner-operators typically depends upon how long it takes your clients to pay off the invoice. This is because you are billed either per week or per month that the invoice is outstanding. The normal discount rate you’ll pay fluctuates from 2% — 5% per month.
Freight bill factoring for larger trucking companies will typically be more affordable per invoice, because you’ll be billed a flat fee per invoice instead of paying a fee per month or week you are in repayment. There can at times be extra fees with this type of factoring, but it should nevertheless have a less expensive cost per statement than transportation factoring for smaller owner-operators. Your discount rate can fluctuate between 0.5percent — 5 percent per invoice.
The table below represents an example of the typical costs you will likely see with each volume of freight factoring over a 60-day repayment window.
Transportation Factoring Prices — Cases
| High Volume Factoring > $30K per Month |
Low Volume Factoring < $30K per Month |
|
|---|---|---|
| Amount Factored | $30K | $10K |
| Discount Rate | 2.5% per statement | 2.5% per month |
| Repayment Time | 60 Days | 60 Days |
| Total Cost | $750 | $500 |
Keep in mind that the higher quantity cargo lien may also have additional charges, such as a one-time origination charge of $500, or different fees if you are not able to meet minimum factoring amounts demanded by your factor.
Freight Factoring Terms
The general provisions of cargo factoring also vary based on the volume of invoice value you’re factoring. Let us Look at All the differences in the way the provisions work for low and high volumes of freight factoring:
Contract or Spot Factoring
Contract factoring is when you’re typically needed to factor all your invoices, whilst spot factoring gives you the flexibility to select and choose which bills you factor.
Low Volume: Position factoring
High Volume ($30k+): Contract factoring, with some place factoring accessible
Advance Rate
The advance speed for cargo lien is the way much of your invoice’s value the factoring company will pay you up front, before the bill is paid in full.
Reduced Volume: 85 percent — 100%
High Volume ($30k+): 90% generally, but can range from 80 percent — 95 percent
Amount Factored
Low Volume:
Minimum: $1,000 per financing event
Maximum: $2 million per funding event
High Volume ($30k+):
Minimum: $30K a month
Maximum: $20 million per month
Repayment Terms
Low Volume: 1-24 Weeks
High Volume ($30k+): 30, 60, or even 90 days
If you are an owner-operator seeking to get financed for your current outstanding invoices, or even a larger company looking to get paid faster, then BlueVine is a great option for you. You have to factor a minimum of $5K, and have at least 3 months of company operations. If that is you then you might get financed for your outstanding invoices in as fast as 1 business day.
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How Freight Factoring Works
Freight moved by trucks accounted for 68 percent of all of the cargo moved by US companies in 2013, and is anticipated to account for 78 percent of all cargo by 2040. Thinking about the total amount of freight moved accounts for about $50 billion of business, it is a no brainer which there are plenty of opportunities for trucking businesses of any size to carry on more hauls. However, it makes it difficult to undertake additional jobs if cash flow is tight. That is where freight factoring comes in.
Freight factoring allows you to be paid up front for a portion of your unpaid invoices. The factoring company will pay you up to 90% of your bill’s value, and then pay you the remainder, minus their charges, after your client has paid off the invoice.
Transportation factoring typically has 5 steps:
Step 1: Invoice Your Client
There must be a statement to your customer before you can be approved for freight factoring.
Step 2: Assign Invoice into a Factoring Company
Larger volume factoring requires you to sell and assign all of your invoices to the company for them to accumulate. Low volume factoring typically works more like a credit line and permits you to select and choose which bills to fund.
Step 3: The Factor Pays Your Advance
This is where you get paid quickly to get a percentage of the bill’s value.
Step 4: Your Customer Pays the Freight Factor Directly
Your customer pays off the bill by paying the trucking factoring company right. Low quantity factoring companies may let you continue to collect the invoices and just make monthly payments to them.
Measure 5: Factor Pays You Remaining Balance Minus Their Charges
The Factor, at this time, will require their charges from the client’s payment and forward you the remainder.
Though this is typically how bill factoring functions for transport companies, you can see that there are a few slight differences based on what your financial volume is. If you’re a high-volume freight company you can learn more by reading our final guide on invoice factoring. If you’re an owner operator looking to do less than $30K in lien each month then you should read about accounts receivable financing.
Where to Get Freight Factoring
When looking for the right freight factoring company for your business you want to know where to look for the volume you anticipate factoring, and you need to know what your aim is. For example, if your goal is to fully outsource your account receivable process, then you are going to want another sort of factoring firm than someone looking to get rapid financing while keeping collection responsibility.
Our advocated factoring company for large volume factoring of $30K+ per month is TCI Business Capital. They do a good deal of factoring in the trucking industry, and can get your business approved within 3-4 days. The table below represents their basic provisions, qualifications, and prices.
TCI Business Capital Freight Factoring in a Glance
| Monthly Funding Amount | $50K – $20 Million |
| Advance Rate | 90% |
| Discount Rate | 1% – 4% per invoice, billed when the bill is paid in full |
| Qualification | Creditworthy clients Factor $50K+ per month Invoices because in 30, 60, or 90 days |
| Get Started | www.TCIBusinessCapital.com |
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For more information you should check out our invoice factoring buyer’s guide for big volume freight factoring firms.
If you’re looking at factoring significantly less than $50K per month then you will want to check into less conventional invoice factoring companies.
BlueVine is our recommended alternative if you’ve got a minimum of 5K in outstanding invoices to factor upfront. Here is the middle ground solution which will work to get some owner-operators and a few bigger trucking companies. The table below is a snapshot of the conditions for cargo Leasing through BlueVine.
BlueVine Freight Factoring in a Glance
| Funding Amount | $5K – $2 Million |
| Advance Rate | 85% (90% if you are pay $50K+) |
| Discount Rate | 2.5% – 5% per month |
| Qualifications | 3+ Months in Business 530+ Credit score US-based Small Business Creditworthy clients |
| Get Started | www.BlueVine.com |
Other Funding Options
If you are seeking to fill a brief term cash flow gap you might benefit from getting either a brief term loan, or a business line of credit. Both could give you the flexibility you need and could fund very fast, and if you repay them within 3 weeks their prices could be competitive to bill factoring.
Furthermore, many freight factoring companies will offer you the option of funding the fuel to your runs before you even invoice your client, to help you cover upfront costs. Even though this may be a good chance if you’re tight on cash, we believe that getting a fuel card would be less costly. If you are seeking to factor your invoice after you create the run, then the factoring firm should pay you before you’ll need to pay any interest on your card.
Based on Amy Van Ness, Controller at FreightCenter,”Since the purchase price of fuel increases, bigger loads are generally prevented if gas funding isn’t an option, which can cause slower moving freight throughout the business. This could hurt transit times and leave many owner-operators without work. Depending on what fuel factoring terms are awarded, the alternate option of using a fuel card may be more valuable. The credit limitation and factoring terms will determine which choice is most suitable for your enterprise.”
If you’re a bigger trucking company with a fleet of trucks, then you might choose to look at obtaining a fleet card to help pay the fuel for all of your vehicles with each other, possibly at more affordable rates.
Bottom Line: Trucking Factoring
Freight factoring may be a fantastic option for high volume trucking companies or small owner-operators with just 1 rig. You may use it to conquer cash flow interruptions, or to help you take on further jobs more quickly. The right freight factoring company depends on the size of your business, and what your end goal is.
If your trucking company invoices at least 50K per month, then we recommend using TCI Business Capital to get you the funding you need now rather than waiting for your customers to pay. TCI can fund up to $20 million over 24 hours after you have been approved.
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