The 4 Best Trucking Factoring Companies
For many businesses, there is a lag time between when they provide a good or service and when they get paid for it. If the unpaid invoices start to pile up, that can hurt a business’ cash flow and growth. Meanwhile, the bills still keep coming.
One quick form of financing some small business owners turn to is income factoring. It’s not the cheapest option, but it could be a good choice for a business with cash flow problems, unpaid invoices and not much time to wait for the invoice to be paid. In particular, the trucking industry is known to use invoice factoring to cover cash flow gaps between the time they deliver freight and the time they’re paid for it.
|Company||Factoring Rate||Funding Amount or Credit Requirement||Advance Percentage||Time to Funding|
|BlueVine||1% standard rate per week for a minimum of three weeks||$20,000 to $5 million||85% to 90%||As soon as 24 hours|
|TBS Factoring||Starts at 1.25% per week||Not supplied by lender||100%||As soon as 24 hours|
|Universal Funding||0.55% to 2% the first 30 days||$25,000 to $5 million a month||Up to 95%||As soon as two business days|
|Fundbox||Fees start at 4.66% flat of total draw amount for 12-week term and 8.99% flat per total draw amount for 24-week term||$100 to $100,000||100%||As soon as 24 hours|
Rates as of September 19, 2018
What is trucking factoring?
Trucking factoring (sometimes called freight factoring) is a type of invoice factoring where a trucking company sells its unpaid invoices to a factoring company. The factoring company then gives the business an upfront loan that amounts to a percent of the total invoice value. That percent is typically 75 to 90 percent, although the companies discussed here offer much better. Once the invoice or invoices are paid off, the factoring company sends the rest of the money to the borrower, minus a fee. The fees usually range from 2 to 5 percent a month.
The fees can be structured in different ways. A few factoring companies will charge a flat fee (a percentage) and take that right off the top. Others will used a tiered system, a percent charged each week until the invoice is paid. That percent usually goes up the older the invoice gets.
Some companies will take complete control over your invoices, including collecting on your unpaid invoices. There are some, though, like BlueVine or Fundbox, that leave collecting on the invoices to the borrower. Whether that’s a good or bad thing depends on if you want to retain control over your invoices. Some business owners might welcome the chance to hand off collections to someone else while others might not want to confuse or worry their customers by having the factoring company contact them for payment.
So what happens if your client doesn’t pay their invoice you borrowed against? There are two main types of factoring that determine the outcome:
Recourse factoring — This is when the factoring company can seek payment from you if your client doesn’t pay. That could mean you have to buy back the invoice, or, in some cases, swap out the invoice for a different one. This type of factoring is cheaper because it’s less risky for the factoring company. That’s why it makes more sense to sell the invoices of your customers who pay reliably.
Non-recourse factoring — In this instance, if your client doesn’t pay, you’re not responsible for repaying the factoring company. However, there are some factoring companies that offer non-recourse financing where you are still responsible for paying the invoice unless the customer declares bankruptcy. Others will assume full responsibility no matter the reason the customer doesn’t pay. Non-recourse factoring is more expensive to the borrower because it’s riskier for the factoring company.
Pros and cons of truck factoring
Unlike many small business loans, especially those from traditional banks, it’s fairly easy to qualify for trucking factoring. Factoring companies care more about the creditworthiness of your customers because it’s the customers who pay back the invoices.
Trucking factoring could be a good option for companies that have large amounts of outstanding invoices, need cash quickly to cover expenses like salaries, fuel or to take on new jobs; and don’t have the time or qualifications for a bank loan. Factoring can be expensive, though, especially if your clients take a while to pay off their invoices.
Here are some additional pros and cons of truck factoring:
- Easy approval qualifications, including being open to business owners with bad credit
- Fast funding
- Good for cash flow gaps
- Helps you cover expenses while you’re waiting for your customers to pay
- No collateral required
- With some non-recourse agreements, you’re guaranteed to receive at least some of the value of an invoice if your customer doesn’t pay
- High cost: a factoring fee of 2% for a 30-day advance of 80 percent of the invoice equates to a 34.4% APR on the amount advanced
- Some factoring companies require minimum contract lengths or invoice amounts
- The fee structure at some companies can be confusing
- Your customers might be worried or offended if they’re contacted by a different company for payment. That will especially be the case if the factoring company uses aggressive collection methods.
- With recourse factoring, you’ll have to pay off the invoice if your customer doesn’t
How to apply for trucking factoring
Many of the companies that offer truck factoring don’t have a minimum credit score requirement for approval. Others will provide loans to people with credit scores in the low 500s. BlueVine, for example, has a 530 credit score requirement.
Some companies may require you to have a minimum annual revenue — BlueVine requires $100,000 and Fundbox requires $50,000. Many of these companies will work with brand-new businesses; others may require three to six months in operation.
Applying for trucking factoring is very quick and easy, and funding can come as soon as a day or two.
The most common documents you’ll need to apply for trucking invoice factoring include:
- Accounts receivable list
- Accounts receivable aging
- Customer list
- Recent bank statements
- Your company’s articles of incorporation
- Sample invoice (along with supporting documents like contracts and purchase orders)
BlueVine offers both a business line of credit and invoice factoring to small businesses in multiple industries. There are no hidden fees with BlueVine, and it charges a flat 1% rate for each week your invoice is outstanding. To be eligible for its invoice factoring, you’ll need a personal credit score of 530 or more, three months in business operation and $100,000 in annual revenue.
Where BlueVine stands out
Unlike most factoring companies, if your account stays within good standing, BlueVine does not take over your company’s invoices. You still maintain control over the invoices and are responsible for collecting the payments, so your customers won’t know that you have factored your invoices.
Where BlueVine falls short
BlueVine requires a lien and a personal guarantee to secure the funding. That means that if your customer hasn’t paid by the end of their invoice term, you’re on the hook for paying the invoice. BlueVine also has higher standards for annual revenues, time in business and minimum credit score compared to some companies that offer trucking factoring that don’t have minimum requirements in those areas.
Additional benefits of BlueVine
BlueVine offers quick approval and funding. You also don’t have to provide any documentation if you agree to connect your bank account directly to BlueVine’s system.
Unlike the three other companies on this list, TBS Factoring offers invoice factoring solely to the trucking/transportation industry. The company offers both recourse and non-recourse factoring and handles collections on the borrower’s invoices.
Where TBS Factoring stands out
TBS Factoring does not hold back a reserve percent of an invoice, but offers 100 percent of the invoice value upfront for non-recourse factoring. That means a borrower gets all the invoice money even before a customer pays. The company also has no minimum credit score, time in business or revenue requirements for approval.
Where TBS Factoring falls short
Because TBS Factoring handles collecting on customer invoices, it can save you time, but it also may be confusing or concerning to your clients to be contacted by a different company to make their payments.
Additional benefits of TBS Factoring
TBS has no monthly factoring minimums and also offers perks like a fuel card program and free credit checks on your customers so you can choose the right invoices to finance.
In business since 1998, Universal Funding works with B2B companies in multiple industries, including transportation/trucking. The company has no minimum credit score, time in business or annual revenue requirements for approval for its invoice factoring.
Where Universal Funding stands out
Unlike many factoring companies, Universal Funding has a monthly factoring fee instead of a weekly fee. That could potentially save you money if your client doesn’t pay their invoice right away.
Where Universal Funding falls short
If an invoice goes unpaid after 90 days, you’ll have to swap that invoice out for another one or buy the invoice back. Universal Funding also charges several additional fees, including a $35 credit approval fee and a $50 lock box fee.
Additional benefits of Universal Funding
On its website, the company clearly spells out its process for collecting on your customer’s invoice, including introducing themselves via a letter on your company letterhead.
Fundbox technically does not offer invoice factoring, but invoice financing. That means it doesn’t purchase your outstanding invoices, and it doesn’t collect on the invoices from your customers. Fundbox also provides the full value of the invoice upfront instead of holding some back in reserve. Like BlueVine, Fundbox connects directly to a business’s bank accounts or accounting software to determine the financial health of a business.
Where Fundbox stands out
Fundbox’s financing is structured very differently than the others on this list. In addition to getting 100 percent of the invoice value upfront, you pay a flat draw rate 12- or 24-week term. After that, your rate is based on your customers’ creditworthiness. Its invoice financing is similar to a revolving business line of credit. In exchange for your invoices, it gives you access to credit equaling your invoice. You don’t have to use all the credit; you can “draw” a certain amount, starting at $100. You only have to repay what you draw, but each draw is considered a separate loan and fees will apply to each draw.
Where Fundbox falls short
Fundbox caps the amount of its loan at $100,000, which is much lower than other companies. Fundbox also requires businesses to have six months of invoicing records, so, your business must essentially be at least six months old to be eligible for financing. You also must have accounting software that works with Fundbox’s plug-in.
Additional benefits of Fundbox
There are no subscription, maintenance or activity fees. Because Fundbox does not take over collecting on your invoices, your customers won’t know that you have financed their invoices.
The bottom line
Trucking factoring can work well for companies that need quick financing to cover cash flow gaps. That especially works for companies who have creditworthy clients who tend to pay their bills in a timely manner. Just make sure you have the ability to pay any factoring fees and to cover a situation where your client doesn’t pay their invoice.