Trucking companies are an essential cog within the automotive and transport industry in the United States of America – without this sector, how would products be transported from the East Coast to the West Coast? The trucking business can be highly profitable and earn a considerable capital gain, but only if you set up your company correctly. On the flip side, the trucking business can be characterized by a high level of competition and potential for debt if not maintained and run perfectly.
Many new entrepreneurs and small business owners decide to change and get into the trucking business every year. However, unfortunately for those big-thinking people, the majority of these new businesses fail for various reasons. Some of the most common reasons for business failure in the trucking industry are a lack of knowledge about funding methods for their business to stay afloat, avoid going into debt and pay investors and vendors on time and with the right amount.
Knowing how to start, fund, and run your trucking company is the most crucial part of starting a new business that you hope to stay open and lucrative for many years to come. Fortunately for entrepreneurs and small business owners who want to run a trucking business, there are specific funding methods that can help you stay on the positive side of the financial line when you feel like you are losing clients and losing resources.
One of the most essential aspects of the trucking business – and any new company – is to keep your clients and vendors happy. To keep your vendors happy and your employees satisfied, you need constant cash flow to pay people on time, increase your reputation, and avoid any bad blood between you and ex-partners or ex-employees. Let’s see one of the best methods of maintaining strong business relationships and keeping a good financial standing for your long-running business.
What is freight factoring?
Freight factoring is a modern method of funding for both trucking companies and transport businesses. Also known as truck factoring or invoice factoring, this funding method gives businesses quick cash flow without worrying about making their clients pay prematurely or in full if they are not able. Transport companies can use their invoices to receive cash advances from factoring companies to pay for immediate expenses, employee salaries, daily expenditures, and other overhead costs.
- For example, if a trucking company’s unpaid invoices show that Client #1 is supposed to pay $10,000 by the end of next week, but you are pretty sure they will be late for their payment, you can obtain a cash advance on the spot to pay employees, vendors, and other people who you owe money to. The cash advance will usually be between 70 and 90% of the total unpaid amount, so the trucking company can obtain between around $8,000 and $9,500 on the spot to pay for overhead costs.
How freight factoring works
Freight factoring is similar to obtaining a loan from the bank – except it is much easier, faster, and less complicated than waiting for a lengthy bank loan and needing approval. Of course, there are positives and negatives to any form of getting money quickly, but freight factoring has the most benefits, which work for people who are in a bind and need money fast.
Freight factoring can provide trucking companies with cash almost immediately, instead of having to wait weeks – or even months – for a bank loan approval to go through in the system. Truck factoring is a smart way to get money immediately, especially if you find that one missed payment could cause your business to shut down forever.
Five benefits of factoring fuel advances
One of the main benefits of using truck factoring is getting fuel advances. As you may find, being a new business owner or running a startup company is that being the owner of a business can be expensive – and you may not be prepared for those costly overhead costs.
Running a trucking company or owning a small fleet can wrack up more debt than you initially thought. Aside from paying your employees and ensuring the drivers are paid on time, you often have to pay for fuel for every one of your trucks – which can be very costly.
Keeping your trucking units filled up consistently for each long-haul trip can be stressful and require a lot of planning. If you find that fuel is one of the most considerable costs driving you closer and closer to financial panic, you should consider using truck factoring to obtain fuel advances.
Most owners of trucking companies and fleets find that they can’t afford to wait between 30 and 60 days for clients to pay their unpaid invoices so you can pay for fuel. They need money sooner rather than later to pay their employees, pay for fuel, and pay their vendors.
One way to solve this common issue is by getting in business with a truck factoring company with a fuel advance section, allowing you to never worry if your fleet will be filled before each trip. This program lets you earn funds as soon as you pick up the new trucking load, reducing stress and wasted time.
Helps owners and small fleets
The first benefit of using fuel advances for truck factoring is to help yourself, the owner, with daily operations. If you do not have a lot of time – or a lot of money – fuel advances can prevent you from needing to pay out of pocket or dip into the red zone to pay for fuel. Qualifying for a fuel advance program with a truck factoring company is easier than it may seem since it has the exact requirements of a typical truck factoring business program.
Take on more loads
If you can pay for more fuel, you can take on more jobs and earn more clients in the process. If you never expand your client base, you will stagnate in terms of money. Since it may be easier to lose clients than gain new ones, if you stick with the same clients, your income will slowly dwindle as the needed work declines.
Instead, fuel advances let you take on more work for your business. Fuel advances prevent you from needing to negotiate with freight brokers or shippers for advance payment, allowing you to get your needed funds from the truck factoring business without having to haggle or spend hours on the phone trying to plead your case.
Improve cash flow
The third benefit of using fuel advances from a truck factoring company is to improve your cash flow and maintain a steady stream of income. A fuel advance with a factoring program is the best way for a trucking business to stay afloat, take on new clients, pay vendors, and pay their employees on time. This combination lets you keep your cash coming in consistently and provides you with working capital to continue expanding your business.
By putting you on a stable financial platform to continue growing, cash flow and truck factoring help you expand your clientele.
Work with fuel cards
The funds you can receive for fuel advances are typically directly deposited into your fuel card account, giving you versatility in choosing to use these funds as a business owner. Do you need to fill up particular fleets more so than others, or do you need to use some of this money to repair specific trucks? As a business owner, you can use fuel advances in the best possible way for your business.
Grow your business
Lastly, the final benefit of fuel advances for trucking businesses is to grow your business. Without capital and a steady cash flow, you will not be able to take on new clients and pay vendors. Fuel advances let you haul more long-distance loads and grow your business by taking on more work.
Without having fuel advances paid for, trucking owners would not be able to pay their necessary daily operations and overhead costs. Since your money will not be redirected to fuel, you can focus on other things that require immediate compensation, such as your vendors, employees, and co-workers.
Ensuring you stay in a good financial state and maintain a positive reputation in the industry is crucial to earning more clients and keeping the ones you already have. Fuel advances help you keep funds for ensuring everyone is well cared for when it comes to finances and being paid on time.
As you can see, using a truck factoring business that provides a fuel advance program lets you save money, increase productivity, and earn more clientele. The main benefits of a fuel advance program are to grow your business, distribute the cash flow as you choose, earn more income, grow your clientele, and help owners and new entrepreneurs stay afloat and out of the red zone when it comes to finances. Using fuel advances