In case you didn’t know, there’s a lot more to running a modern freight company than typical owner or manager duties. You must also be your HR department, marketing department, and accountant. Freight factoring also referred to as load factoring, can make the accounting aspect a bit easier by assisting with cash flow management.

That being said, how does freight factoring work, and how do you know whether or not it is right for your company? We will discuss this financial service in this article.

Freight Factoring Explained

First of all, it’s important to understand the basics of freight. You pick up goods at one location and deliver them to the next. The shipper or broker then pays you for that service. The amount you are paid minus your costs is your profit.

However, you typically are not paid right away. The industry standard is 40 days, and in some cases, a company takes up to 90 days to pay invoices. This is a long time to wait when you are counting on the money to cover expenses.

This is where freight factoring comes in. this allows you to get paid immediately. You sell the invoice to a third-party factoring company that pays you a slightly reduced rate. This allows you to focus on hauling loads instead of worrying about when or if you are going to get paid. It allows you to cover your expenses without having to use your credit card, take out a loan, or use your savings.

Benefits of Freight Factoring

There are some benefits associated with freight factoring, including:

Same-day pay
Reduces accounting burden
Qualifies brokers
Reduces stress over whether or not a company is going to pay

Choosing the Right Freight Factoring Company

When you are looking for a freight factoring company, you’ll tell them about your business. They will then check your background/history and make an offer. Be sure to read the fine print to ensure that you understand the offer. Pay close attention to the following:

How quickly you will be paid
How much you will be able to “borrow” against your outstanding invoices
Types of programs they offer
Percentage of advancement (will they pay the full amount or only a portion?)
Aging fees on invoices
Termination of contract
Additional fees

Ready to Get Started with Freight Factoring?

For many freight companies, regardless of size, freight factoring is a great way to outsource accounting/collections and ensure steady cash flow- which makes it easier to run a business. The key is to look at all the facts to determine if it’s a good solution for you. If you are ready to get started with freight factoring, contact Commercial One Group today and we’ll get you started.