Every industry and business has been impacted one way or another in the last 12 months or so, with small businesses bearing most of the brunt. The challenge is even greater for owners of trucking companies, as customers are likely to default or delay invoice payments due to lack of liquidity. This negatively affects the business, hampering cash flow and bill payments.

Sending constant payment reminders is not a solution, but neither can you play the waiting game.

What is factoring?

Factoring is an innovative way of financing that allows instant access to cash in exchange for unpaid invoices. When you hire a freight factoring company, they will buy your unpaid invoices in exchange for cash that has a value approximately equal to that of the unpaid invoices. A big percentage of the money, nearly 85%, is paid upfront by the factoring company.

The rest of the money is transferred to your account after the company has completed the collection process from your customers. It is a great way to protect your truck business from unpaid invoices, which can take weeks or even months to process.

How to choose a factoring company?

Factoring companies have come a long way in the last few years. Unethical collection practices are no longer followed and they offer greater control to trucking businesses. Still, it is important to evaluate various factoring companies before you zero in on one. Here are a few tips to help you make the right choice.

• Go with experience
  The longer you stay in a business, the better you’ll get at it; this idea applies to factoring companies too. So, while evaluating your options, see which company has been in the business longer. Also, check out how much experience these companies have in the logistics industry— the trucking business, in particular. If they do, they’ll likely know the intricate details about the industry and offer better financial terms to you.
• Look out for flexible terms
  If a factoring company offers flexible terms, such as price breaks, enticing rates, and the option to choose which customers to factor, make it your top choice. Flexible terms are a sign that the company understands the business well and has enough experience to know what works and what doesn’t.
• Freedom to choose between factoring strategies
  Good factoring companies will always give you the freedom to choose between recourse and non-recourse factoring. Recourse factoring is slightly riskier since you’re guaranteeing that the customer will pay the invoice. But if the customer defaults, the factoring company will hold you accountable and collect the money from you. Non-recourse factoring, meanwhile, doesn’t come with this risk. The factoring company accepts full responsibility if the customer doesn’t pay the invoice.

Best factoring companies

Here are the leading freight factoring companies in today’s market.

• BlueVine
  BlueVine offers advance rates of 85%-90% of your invoice value. The cash will be transferred within a day or two, and the company has a weekly discount rate of just 1%.
• TBS Factoring
  The company offers both recourse and non-recourse factoring. TBS Factoring provides a 100% advance on your invoice and charges 1.25% per week.
• Riviera Finance
  You can borrow cash up to $2 million from Riviera Finance. While same-day funding isn’t available and discount rates start at 2%, the company does not have any minimum qualification requirements.
• Apex Capital
  Like Riviera Finance, Apex Capital also processes factoring requests of most businesses. Weekly rates start at 2%, with the funding amount processed on the same or next day.