Carrier Factoring Mythbusters: Cash Flow is the Only Benefit
Fleets that operate five trucks or less make up 86 percent of Federal Motor Carrier Safety Administration (FMCSA) registrants. Small fleets need access to working capital within 15 days, and in many cases within 10 days of delivering loads to keep their wheels turning.
The competition for truck capacity has put pressure on shippers and brokers to pay quickly, but carriers are also using products and services, such as factoring, to get instant access to capital. A common myth, however, is that the only benefit to factoring is cash flow.
The factoring process offers multiple cost-saving services for carriers. A factoring company will typically provide the invoicing, collections, risk relief (with non-recourse factoring), and even financial advice.
In addition, some factoring companies offer free credit checks so carriers will know ahead of time whether or not they can factor invoices from certain shippers or brokers.
By outsourcing these items, carriers are able to free up their own resources to find better loads and negotiate higher freight rates.
Factoring has traditionally been viewed as a last resort for carriers to quickly access working capital. New services are available that offer low, flat fees with no hidden costs to make it possible for carriers to use factoring where and when it makes sense to grow their businesses and profits.