How do you manage your invoicing? For most trucking company owners, you have staff who process bills of lading and generate invoices. Those invoices are sent to clients via email, mail, or fax. Now, it’s a waiting game. They have a specific amount of time before the invoice is overdue. Will they pay on time? If not, you struggle to keep up with your employees’ wages, loans, and other bills. It’s frustrating.
Freight factoring is a helpful service where you hire a factoring company to do the invoicing and collect payments. You get payment immediately and no longer have to wait. In exchange for this service, you pay a factoring fee that’s typically not more than 5%, but it depends on the terms you set and the amount of work your drivers complete each month.
The niche trucking market gains several benefits from freight factoring arrangements. In addition to immediate payments, there are many additional enhancements you can add to help manage and grow your trucking company.
What is Niche Trucking?
Niche trucking involves specialized markets that are often in higher demand because not every trucking company offers them. It includes refrigerated trucks for hauling items like fresh produce, frozen goods, or perishable items like dairy. Niche trucking jobs tend to have higher pay because specialized trucks, experience, permits, or licensing are necessary. Other niche trucking industries include:
- Car haulers – Transportation of vehicles from automotive plants or ports to dealerships.
- Hazmat loads – Transportation of hazardous materials like chemicals, gasoline, and propane.
- Ice road truckers – This niche industry was showcased on a TV show and involves driving dangerous routes where temporary roads form over frozen lakes and rivers during the winter.
- Mining Industry – Transporting valuable minerals like coal from off-road mines to processing facilities.
- Oversized loads – Transporting oversized or heavy loads like construction equipment, mobile homes, and military equipment.
- Tank hauling – Transporting tanks filled with liquids, such as raw milk, that shift around during transportation.
Some niche industries, such as ice road trucking, are seasonal. It’s impossible to get out to a diamond mine once a lake or river thaws. Because the work is busiest from winter to early spring, it’s important to get paid quickly and get cash stored up to last through the rest of the year.
What Benefits Does Freight Factoring Provide?
One aspect of running a successful niche trucking company is getting paid on time. If payments don’t arrive for 60 or 90 days, you have to float a lot of expenses from your savings. What happens if your savings run low, and you’re still awaiting payment?
Freight factoring ends those struggles, but it’s something you need to carefully arrange. If your client never pays due to bankruptcy or unexpected business closures, you could be responsible for paying back any cash advance or same-day payment you received. Protection is available, but you will pay a higher factoring rate. It’s often worthwhile for that added insurance.
Your office workers won’t spend hours every day generating invoices and chasing payments. A freight factoring company does the invoicing and collections process for you. It’s a huge timesaver, which frees you up for important office work like licensing, permit applications, planning routes, and marketing your niche business to brokers and shippers.
Freight factoring arrangements can include a business debit or fuel card. Payments go directly to your card, and you get lower prices on all fuel you put into your trucks. There are often restrictions on which truck stops and gas stations offer the discounts, but you’ll have tools available to find the nearest discount station.
A niche trucking company needs to keep busy to keep money coming in. Load-finding apps simplify the process. Look for work in your area, along your route, or by the niche industry you’re in. Check rates, use free business credit checks to investigate the potential client, and take as much work as you can handle throughout the year.
One thing to remember is that you have to have the right licenses and permits to complete some jobs. A hazmat driver must be specially trained in hazmat loads. Make sure you’re using the money you get from freight factoring to keep up with training requirements, licensing, and permits. If that’s not enough, it may be time to consider a business credit card. Look for a freight factoring company that provides competitive rates on credit cards. When business picks up, you can pay off the charges you made on that card.
If you’re ready to grow your fleet, low-interest business lines of credit are helpful. Borrow only what you need, but have the funds there to make the purchase. You already have the funds. You don’t have to apply and hope you’re approved before the truck is sold to someone else.
Tips for Choosing the Best Freight Factoring Company
How do you choose the best freight factoring company for your niche trucking business? Start by learning more about the rates and terms. Take time to talk to several companies and make sure you understand any hidden fees or penalties applied if your client doesn’t pay on time or at all.
Never sign a freight factoring contract without reading the full contract. Ideally, have a business attorney go over it with you. When there are negative reviews, there’s often a pattern involving the trucking company’s owner failing to understand all of the terms in a contract. For example, you might learn that any report of a fraudulent transaction by your company or one of your clients could lead to your escrow account being frozen until the matter is investigated.
Find out what your options are for reaching customer support. If you’re on the road, you may not be able to make a call during normal office hours because you’re driving. Is email or after-hours support available?
How long have they been in business? A new company may be fine, but there’s no proven track record to ensure they have the financial backing to help you thrive.
Finally, ask about additional services such as fuel discounts, low-interest business lines of credit, find load apps, and unlimited free business credit checks. All of those can help your niche trucking company turn a profit.
Niche trucking companies need a freight factoring partner with industry experience and expertise in growth. Since the 1990s, Saint John Capital has helped many start-ups grow from owning one or two trucks into a national company with large fleets. Our range of services is designed to be customized to meet your needs now and are easily adjusted to help you stay competitive as the years pass.
