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How freight factoring works

The trucking business is a highly competitive industry in the United States, and up-and-comers are faced with several roadblocks, usually the delay in the cash flow. There are new trucking businesses that need stabilizing, but unfortunately, there are instances where a customer will take a long time before paying for the services rendered by the company, thus delaying and hindering the progress or possible business expansion that the trucking services owner may be interested in.

Freight factoring provides an easy solution to this. Freight factoring is a convenient and reliable way to get paid for your freight bills now. Factoring companies exist to initially provide money to trucking businesses in order for the latter to be paid immediately after a service. When the client finally pays, the balance amount in the factoring will now be given to the trucking company, and the factoring company will finally get the share for its services. This type of deal allows the trucking company to be funded for its daily operations, providing room to grow the business.

While the premise surrounding freight factoring may sound a lot like loaning; according to the website TBS Factoring Service, it is actually not a business loan. Freight factoring would require the company to sell its invoices, and always at a discount, in exchange for immediate payment by the factoring company.

Firstly, once the trucking company seals a load with the client, the information about the transaction is then provided to the factoring company for confirmation and approval. After the trucking service, the bills of lading (a document that specifies the shipment of merchandise and gives the shipment title to a particular party) and other relevant documents are sent to the factoring company. The factoring company will now send the payment to the trucking company following the agreed-upon rates. Finally, when the client has paid the invoice, the trucking company will receive the balance.

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