Fleet managers and owner-operators who haven’t been looking into the benefits of freight factoring may be missing out. New ways of leveraging this financial instrument to boost operational efficiency are emerging.
Freight factoring is loosely defined as money advanced on accounts receivables by a third party, usually for a fee. Because it’s harder for small or new trucking companies to get a line of credit from the bank, factoring gives them a fast and reliable way to maintain an operating cash flow. Without it, many would be unable to purchase freight bills.
The Growth of Factoring
Freight factoring mainly serves to speed up cash flow. Since many fleets pay for their accounts receivables on the day they complete the delivery, factoring allows them to get the cash they need to carry them through to the next load. Factoring takes the waiting out of the game.
Factoring has been playing a role in trucking for a long time, mainly due to the need for a continuous stream of operating cash flow. Over the past several years, freight factoring has grown substantially.
As freight levels rise, carriers are looking to buy more trucks and get them on the road. Some fleets are discovering that they can tap their cash flow to make large purchases and grow their businesses. For many fleets, it’s a new way to use factoring.
The Evolution of Factoring
Companies who once only provided factoring services are now starting to expand into other areas. Beyond basic recourse and non-recourse factoring, some are offering financial services to fleets, from load-matching to purchasing fuel and equipment.
Freight factoring firms have grown into full-service providers that offer their clients more than the standard cash flow management solution. Now they are providing business tools that can help streamline operational efficiency over the long haul.
The standard accounts receivables factoring has been enhanced by a multitude of other services. Together, the combination of factoring and financial services provides trucking clients with full one-stop shopping.
The Future of Factoring
As factoring providers continually branch into other areas of business, expect these services to explode across the trucking spectrum. Whether it’s for fuel discount services, invoicing and collection services, online credit-history checks, or back office support, soon factoring will be forgotten as the thing that got these operations started.
With clients being able to find loads and run free credit checks on brokers and shippers, better decisions can be made regarding what loads they haul. Fuel finder apps allow truck drivers to see the best fuel prices on their designated route. Many factoring apps can seamlessly integrate account management functions with freight planning, making operations faster and easier.
Even emergency road service is appearing as another area factoring has touched. One company is providing an emergency road service through 36,000 vendors across North America. There’s no subscription fees, though there are transactional charges. With the number of aging trucks on the road, factoring services are playing a much-needed role.
Win-Wins in Factoring
Technology is reshaping the game in almost every industry, and factoring is not immune. The technology supporting factoring is getting more and more advanced by the year. The next wave in factoring immersion is going to be in the area of paperwork.
Streamlining paperwork is on every fleet manager’s mind. Many factoring organizations are now looking to roll out load boards specifically for their customers. Becoming a full-service provider of business tools and financial services locks in long term relationships with important clients. It’s a win-win for fleet and factoring provider.
Freight factoring 15 years ago was only considered for companies that had cash flow issues. Today, it represents a normal operating option for fleets of all shapes and sizes. As the economy improves and more players enter the trucking scene, expect freight factoring providers to continue growing their business. After all, offering crucial solutions for fleets looking to enhance their business is beneficial for everybody.