#Freight invoice factoring full

#Freight invoice factoring full

Once you collect invoices from your customers, you’ll let the invoice discounting company know, and they’ll lend you an amount based on the full value of the invoices. So, how does invoice discounting work? Invoice discounting is when you’re loaned a percentage of the dollar amount listed on your accounts receivable ledger. Doing so will help you identify bad payers and improve your ability to collect payments. The factoring company wants to know how long it takes your clients to repay their debts. With freight factoring, the credit history of your customers is reviewed instead. One of the great aspects of factoring is that it doesn’t involve a business credit check.Īpplying for a bank loan is a lengthy process that requires you to submit a ton of paperwork as they dive into your company’s financial history.

Fees vary depending on the company but typically remain in the 1% to 5% range.įactoring is an excellent way to keep your company’s cash flow healthy without needing a bank loan. After doing so, they’ll forward you the money minus the contracted fee. The factoring company follows up with the client and collects the full invoiced amount. You won’t have to wait 30 days or more to receive the cash from that delivered shipment. After the delivery, you’d send the invoice to the factoring company, which then pays you an agreed-upon percentage of the full amount within 24 hours. The factoring company then assumes the responsibility of collecting the payment from the customer.įor example, suppose you deliver a load to one of your clients. But what exactly is factoring, and why would it benefit your business?įactoring allows you to sell unpaid invoices to a company that pays you between 80% and 90% of the amount billed. Finding a freight factoring company is considered a necessity by many trucking companies for several reasons.