Why Do Trucking Businesses Use Factoring Companies?
Thousands of carriers and brokers across the U.S and Canada utilize invoice factoring to help grow their businesses. Invoice factoring works so well for trucking companies because it is a way to receive funds quickly on delivered goods, instead of waiting on payment terms from customers. This enables a trucking company to pay their drivers, fill up their gas tanks, and have the necessary funds to make any needed repairs or other expenses.
How does factoring work for trucking companies?
It is really quite simple:
A trucking company will submit an invoice or bill of lading for funding from an accounts receivable invoice factoring company.
The factoring company will verify that the invoice is good and then send the trucking business up to 95% or even 97% of the invoice value.
The percentage of the invoice the factoring company is funding is called the advance rate, which is how much of the invoice dollar amount you are receiving in advance of your customer paying.
Once your customer pays the invoice balance to the factoring company, the factoring company will take out their fee and you will receive the rest of the invoice value at that time.
How much does factoring cost trucking companies?
The cost of factoring can vary a lot depending on a number of different things, such as how long it will take for your customer to pay.
There are two main ways that factoring fees are charged: 1) Tiered and 2) Flat fees.
Typical fees will range from 1-3% of the invoice value. To learn more about fees please check out our article at www.merituscapital.com/comparing-factoring-fees. At Meritus Capital our fees start as low as 0.3%!
To find out more about Meritus Capital's program, feel free to contact us at 1-877-648-3709