Trucking Factoring Companies: The Top 4 Options

As the owner of a trucking company, you might feel like you’re playing a constant waiting game when it comes to being paid. Receiving payment for an invoice may take weeks, even months. Unpaid freight bills can wreak havoc on your cash flow and limit your business’s growth, which may have you wondering whether trucking factoring companies can help.

Trucking factoring companies—also known as freight factoring companies—give you an advance on your outstanding invoices, and they collect the payment from your customer when the invoice is due. Additionally, trucking factoring companies can often take the risk of nonpayment off your shoulders—for a price.

The best all-around trucking factoring companies are:

1. Fundbox
2. TBS Factoring
3. Apex Capital

Finding the best factoring company for your trucking business is key, especially since most truckers develop a long-term relationship with the trucking factoring company they choose to work with.

Chances are, once you find the right trucking factoring company, you’ll factor multiple invoices with them. Trucking factoring companies are also different in terms of price, so comparison shopping is important for getting the best deal.

Here’s your ultimate guide to finding the best factoring company for your trucking business:

Trucking factoring companies are financial third parties who will buy your business’s accounts receivables at a discount. After they buy the invoice, the invoice belongs to them. This means that the factoring company will chase down the customer for their invoice payment.

An unpaid invoice shouldn’t mean that you can’t afford to pay your employees or make rent this month. Truck factoring—more generally known as factoring or invoice financing—helps small businesses better manage their cash flow.

One important distinction you’ll come across when comparing trucking financing companies is recourse versus non-recourse factoring.

Recourse factoring is similar to a personal guarantee that your customer will pay the invoice. If your customer ultimately doesn’t pay, you’re on the hook to pay the factoring company. To avoid this problem, if you opt for recourse factoring, make sure you’re hauling goods only for clients who have a good commercial credit history.

With non-recourse factoring, you’re off the hook if your customer doesn’t pay the invoice. If the customer is late to pay the invoice or doesn’t pay at all, the factoring company accepts the risk. Naturally, this is what most small business owners would prefer, but non-recourse factoring costs more than recourse factoring.

The trucking factoring industry has changed a lot over the last several years. Truck factors used to be known for unsavory collection practices, and many truckers avoided this form of financing to safeguard their customer relationships. Fortunately, many newer freight factoring companies are placing much more control in the hands of small businesses like your’s. They also offer more flexibility of financing and better prices.

Here are the four best factoring financing companies for trucking businesses.

• Cost: Starts at 2% per week
• Time to funding: Same day or next day
• To qualify: No minimum credit or time in business requirements

Apex Capital is another popular factoring company for trucking businesses. They have specialized in truck factoring for small and medium-sized trucking businesses for over 2o years. And Apex Capital has worked with one-person owner-operators as well as large trucking fleets.

Like TBS Factoring, Apex Capital also offers recourse factoring and a higher-cost non-recourse option. They don’t require any long term contracts or monthly minimum volumes. The weekly rate starts at 2%, making them slightly costlier than TBS Factoring.

Apex Capital can advance your invoice really fast—the next day or the same day even. This factoring company also offers fuel cards and other benefits to their customers. Although Apex Capital doesn’t list qualification requirements on their website, qualifying should be relatively easy as they work with a variety of businesses.

For some trucking companies, the downsides to trucking factoring can be deal breakers. Some companies prefer a more traditional method of semi truck financing—a loan or line of credit. Luckily, there are other ways for trucking companies to get capital.

The two best alternatives to trucking factoring companies are short-term loans
and short-term business lines of credit.

Short-term loans and lines of credit share many similarities with freight factoring. All are quick sources of capital, are relatively easy to qualify for, and are designed to be paid back within a short period of time. The difference, of course, is that the invoices always remain on your books. The lender won’t purchase your receivables.

With a short-term loan, you get a fixed amount of capital that you can use as working capital while waiting for your customers to pay their invoices. Then, you have to pay back the lender in 3 to 18 months.

Short-term lines of credit offer even greater flexibility. You get access to a certain amount of money, and that becomes your credit line. You can draw money from your credit line as needed and only have to pay interest on what you draw. This is a great option for trucking companies that face a variable cash shortage while waiting for freight bill payments to come through. If you know you’ll have a need for capital but are unsure how much, a line of credit is a nice option.

Trucking companies hauled over $52 billion worth of goods in 2015. But trucking companies don’t always reap the benefits of their hard work right away. Sometimes, they are left waiting 30, 60, even 90 days, to receive payment from a client.

For these types of businesses, trucking factoring companies can be a great fit. Changes in the industry have made truck factoring a viable option for small owner-operators as well as large trucking fleets. With options like Fundbox, you can get essential capital, without having to worry about a factoring company intruding on your customer relationships.