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Do regular banks handle factoring for trucking companies?

The trucking industry is vital for the global economy, facilitating the transport of goods across vast distances. In recent years, the need for efficient cash flow management has become more important than ever for trucking companies. 

One solution to this challenge is factoring services, which can help ensure smooth operations and maintain a healthy cash flow. 

This article explains why you should consider factoring with a full-service bank that specializes in transportation industry solutions. 

Invoice freight factoring services for trucking companies

It’s crucial to understand the significance of factoring services for trucking companies. Factoring, a form of invoice financing, allows businesses to sell their accounts receivable to a third party, called a factor, at a discount. This provides the company with immediate cash, improving its liquidity and cash flow

Here are some of the advantages of factoring services:

  • Improved cash flow – Factoring ensures trucking companies have a steady stream of cash. This enables them to meet their financial obligations, such as paying drivers and fuel expenses.
  • Reduced administrative burden – Factors handle the collection of outstanding invoices, allowing trucking companies to focus on their core operations.
  • Flexibility – Factoring arrangements can be customized to suit the specific needs of trucking companies, offering tailored solutions for various sizes and types of businesses.
  • Mitigated credit risk – By selling their accounts receivable, trucking companies transfer the risk of non-payment to the factoring company, minimizing potential losses.

How does invoice factoring work?

Truck invoice factoring works through a process involving a business, its customers and a factor. Here’s a step-by-step explanation of how it works:

  1. Freight invoice issuance: The trucking business provides goods or services to its customers and issues invoices with payment terms, typically 30, 60 or 90 days.
  2. Transport factoring agreement: The trucking company decides to use invoice or freight factoring to improve its cash flow. It enters into an agreement with a factor, which outlines the terms and conditions, including the fee, advance rate and duration of the agreement.
  3. Invoice sale: After evaluating the creditworthiness of the business’s customers, the factor buys its freight bills at a discount.
  4. Advance payment: The factor provides an advance payment, typically 70-90% of the invoice amounts. This advance payment provides the business with immediate cash to cover expenses, such as payroll, inventory or equipment.
  5. Invoice collection: The factor takes over the responsibility of collecting payment from the business’s customers. It may contact the customers directly to collect payment or work with the business to ensure timely payment.
  6. Payment receipt: Once the factor receives payment from the customers, it deducts its factoring fees (a percentage of the invoice amount) and any additional charges outlined in the factoring agreement.
  7. Remaining balance payment: The factor then remits the remaining balance (known as the reserve) to the trucking business. This completes the factoring process.

Reasons to choose traditional banks for factoring services

So, to answer the question of whether banks handle factoring for trucking companies, the answer is a resounding yes. And while there are also companies that only offer factoring services, there are several compelling reasons to use a bank as your factor.

With that out of the way, let’s examine why banks specializing in freight industry financial solutions are ideal factors.

Freight industry expertise

The first reason to consider banks specializing in freight industry financial solutions is their in-depth understanding of the unique challenges and needs of the trucking sector. These banks have extensive experience working with trucking companies, enabling them to provide tailored financial solutions and advice.

Furthermore, they are familiar with industry regulations and compliance requirements. They can ensure that the factoring process is conducted smoothly and without complications. This expertise is invaluable for trucking companies seeking efficient, hassle-free factoring services.

Comprehensive financial offerings

Along with their expertise, banks specializing in freight industry financial solutions offer a wide range of services to support truckers. These may include:

  • Equipment financing – Banks can provide loans or leases for trucks, trailers, and other essential equipment, ensuring that trucking companies have access to the tools they need to grow and succeed.
  • Lines of credit – A line of credit can be a valuable tool for trucking companies, providing flexible access to funds for various business needs.
  • Treasury management services – Banks can assist trucking companies in managing their cash flow and liquidity more effectively, helping them optimize their financial operations.

By partnering with a bank that specializes in freight industry financial solutions, trucking companies can access a comprehensive suite of financial services. An integrated financial strategy can make it easier for you to meet your business needs and objectives.

Competitive rates and terms

Another advantage of choosing banks for factoring services is their competitive rates and terms. 

Due to their strong financial position and extensive experience in the freight industry, these banks are able to offer favorable factoring rates, minimizing the cost of the service for trucking companies. Additionally, they can provide flexible terms that cater to the specific needs and preferences of their clients.

Enhanced credibility and trust

Finally, working with a traditional bank for factoring services can enhance the credibility and trustworthiness of a trucking company. Banks are well-established financial institutions, typically subject to rigorous regulatory oversight. As a result, they are perceived as more reliable and trustworthy than alternative factoring providers. 

This can have a positive impact on a trucking company’s reputation, potentially leading to more business opportunities and stronger relationships with clients and partners.

Factor with a reputable bank that has freight industry expertise

Factoring services are essential for trucking companies to maintain a healthy cash flow and navigate the unique challenges of the freight industry. Banks specializing in freight industry financial solutions offer numerous advantages, including industry expertise, comprehensive financial services, competitive rates and terms and enhanced credibility. 

By partnering with such banks for factoring services, trucking companies can improve their financial stability and better position themselves for long-term success.

Read more in our ‘Find a freight factor’ article series 

FAQ

What is factoring?

Factoring is a financial service where businesses sell their accounts receivable (invoices) to a third party, called a factor, at a discount in exchange for immediate cash. This helps companies improve their cash flow and meet financial obligations.

Why should trucking companies choose traditional banks for factoring services?

Traditional banks that specialize in freight industry financial solutions offer trucking companies industry expertise, comprehensive financial services, competitive rates and terms, and enhanced credibility. These factors make them an ideal choice for factoring services.

What are some other financial services offered by banks specializing in freight industry financial solutions?

In addition to factoring services, these banks may offer equipment financing, lines of credit, and treasury management services, which can help trucking companies manage their cash flow and grow their businesses effectively.

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TAFS is More than Freight Factoring

As one of the industry leaders, TAFS assists trucking companies to increase cash flow with some of the lowest factoring rates in the industry and a 1-hour advance option.