Invoice Factoring Guide for Trucking Companies

In an industry where margins are already thin, any type of financial disruption — whether a late invoice payment or an unexpected truck repair cost — can easily cause cash flow concerns for transportation companies. In some cases, these events can cause such a snowball effect that the end result can be detrimental to your financial health.

Invoice factoring can help you prepare for the unpredictable, with Liquid Capital providing the financial backing to ensure that an unexpected expense isn’t something that sends your company into financial difficulty.

In this guide on invoice factoring for trucking and transportation companies, you’ll learn:

Challenges facing trucking companies

Why should trucking companies use invoice factoring?

What can a trucking company expect with invoice factoring?

How can a trucking company qualify for invoice factoring?

How invoice factoring helps trucking companies grow better

Challenges facing trucking companies

While other industries might find ways to get past temporary cash flow concerns, narrow margins make this more challenging for transportation and trucking companies.

For one Liquid Capital client, a transportation company’s large client started by paying invoices on 30-day payment terms. The company built its business plan, cash flow and projections around this timeline.

Two months later, the client stretched payment terms to 45 days, then 60. After four months, the trucking firm was being paid consistently at 90 days, which, combined with small margins, made it almost impossible for the firm to succeed.

In these conditions, just one additional expense or missed invoice payment in a month can derail financial plans and projections for an owner/operator.

Solution:

When delayed invoice payments from customers affected the ability of Serna’s Trucking to quickly pay subcontractors, Liquid Capital’s invoice factoring not only provided the working capital the company needed to meet its immediate cash flow needs — but also a partnership that has allowed the business to grow to the next level.

invoice factoring for trucking companies

Why should trucking companies use invoice factoring?

While it is impossible for any company owner to perfectly predict how business is going to go in any given month, there is a high likelihood of having last-minute equipment or vehicle breakdowns and repair expenses in the trucking industry.

Invoice factoring is a reliable way for trucking companies to get access to working capital quickly and alleviate cash flow issues.

Liquid Capital purchases your invoices, providing funding and allowing business owners to outsource invoice management by collecting the money owed to you by your customers on your behalf, often in a more timely way.

“By having the money fast, we can pay the subcontractors fast. They don’t have to wait until we get paid. Now, we can pay them the same week.”

Claudia Serna
Owner of Serna’s Trucking

With demand for services increasing, it’s vital for your business to take advantage of this opportunity to grow. But taking steps to upgrade your business can also leave you walking on eggshells, as you may be concerned that you are one additional expense away from financial hardship.

Invoice factoring will not only alleviate this worry but will also allow trucking companies to focus on building new client relationships, rather than on customer payment and collections.

Having a process like invoice factoring in place helps trucking companies know that, if and when unexpected expenses happen – or the payment of freight invoices is later than expected – your business can carry on.

What can a trucking company expect with invoice factoring?

Invoice factoring is incredibly easy for owners of small businesses and medium-sized businesses, such as trucking companies and owner/operators, to learn, understand and implement. Here’s how it works:

Upon approval, get up to 85% of the value of your invoices.
We will collect payment from your customers and we’ll pay you the remainder of the balance (less applicable fees).
You’ll be able to view invoices in our real-time 24-hour online reporting system, where you’ll have full access to funding status.
You decide how long or often you will factor your invoices.
We allow trucking companies to decide how long they want to use our services and we won’t lock you into a long-term contract. If you have months where you have adequate cash flow and don’t need to factor your invoices, you are able to opt-out of the process. If circumstances change – for example, a truck breaks down and you need cash — Liquid Capital will work with you to figure out the amount you need to factor and get you the funds you need to get back on track.

how works invoice factoring for trucking companies

how can a trucking company qualify for invoice factoring

How can a trucking company qualify for invoice factoring?

For trucking companies, the invoice factoring approval process starts by contacting your closest Liquid Capital office (no credit checks or registrations are required or executed at this point). This is followed by a more detailed application where Liquid Capital’s underwriters review your customers’ financial health, including credit reports, references and opportunity analysis.

If your business and accounts receivable clients are in good standing, we’ll approve you for factoring and perform on-going credit monitoring.

How invoice factoring helps trucking companies grow better

In situations where large trucking companies subcontract out their transportation contracts to owner/operators, Liquid Capital’s invoice factoring process has created a structured payment cycle and fostered positive working relationships.

“The partnership has been really positive and Liquid Capital helped position us to grow the company. Last year, we grew around 20% and we expect to grow another 20% next year. With this funding strategy, we’re set up to keep expanding.”

Claudia Serna
Owner of Serna’s Trucking

In one case, a trucking company set its payment terms at 45 days. For owner/operators who needed to be paid more quickly, the company suggested Liquid Capital’s invoice factoring process, which would allow them to get an advance on invoices within 24 hours to generate cash flow. The trucking company would then pay Liquid Capital within 45 days.

This process benefits all involved. Drivers pay a small fee to get a large part of their payment within a day — and the trucking company can proceed with its payment schedule without drivers inquiring about their invoices.

invoice factoring helps trucking companies grow

“I think a lot of companies in the transportation industry should be aware of invoice factoring — and explore if it’s something that may alleviate some stress within their company.”

Liquid Capital Principal

There’s a reason we’re North America’s leading invoice factoring provider.

Need more information about invoice factoring?

We’re ready to help you meet any immediate cash flow needs. Get in touch with us to book a free consultation call, and discover if factoring is the right fit. Or visit our Invoice Factoring FAQ page to read the answers to our most frequently questions.