The trucking industry is the backbone of the economy, and it’s facing a lot of fluctuations right now. Tariffs are part of the problem, but consumer spending has shifted. After Target canceled its DEI programs, the store saw a decline in shoppers. Foot traffic has declined by as much as 8.1%.
Because of fluctuations in consumer spending and purchasing decisions, farmers are struggling because of farm labor shortages, and the tariffs, the trucking industry is expected to bring around economic uncertainty in some areas. Freight factoring is a solution to these fluctuations.
What’s Going on in the Transportation Industry?
Trucking activity increased by 3% in February, increasing from a For-Hire Truck Tonnage of 111.9 to 115.2. However, it’s important to consider that 72.7% of this tonnage was retail and manufactured goods. As tariffs roll out, that could quickly change.
In 2023, truck drivers transported 66.5% of the goods heading to and from Canada and 84.5% of the goods heading to and from Mexico. If they boycott U.S. products and stop sending their products to the U.S., it could cripple the trucking industry. Transportation companies tried to get ahead of the tariffs by getting goods from Point A to Point B ahead of the tariffs, which helped increase trucking activity.
Tariffs are eventually paid for by consumers. If higher prices stop them from spending, a huge drop in retail-based transportation would follow. For this reason, it’s important to start making plans on how you’ll handle the slowdowns.
How Can Freight Factoring Help?
Freight factoring is a financial service geared towards the transportation industry. While there are other types of invoice factoring, freight factoring specializes in freight and transportation. The freight factoring company pays you for the work you’ve done by purchasing your invoice at a discount. We’ll demonstrate how that works.
- You arrive at the warehouse, and the pallets are unloaded.
- You get the bill of lading to prove you completed the delivery.
- Submit that to the freight factoring company for payment.
- You get some of or all of the money you’re owed that day or within a couple of business days.
- The freight factoring company takes over invoicing your client and collecting payment.
There are some factors to consider. If your client doesn’t pay the invoice as promised, you might be required to repay the amount you were paid. This comes down to the type of factoring arrangement you make.
- Non-recourse – You don’t repay if the client didn’t pay due to bankruptcy or sudden closure.
- Recourse – You’re responsible for repayment.
- Mixed – This isn’t always available with every freight factoring company, but there are options where you’re responsible for a percentage of the unpaid invoice, and the factoring company is responsible for the rest.
Why not keep making arrangements on your own as you’ve always done? Freight factoring offers several important benefits when the trucking industry is turbulent.
Build a Strong Cash Flow
You avoid long payment cycles that make it hard to stay solvent. If you’re waiting months to get paid, you’re likely charging expenses on business credit cards and paying high interest rates. Or, you’re paying your creditors late and worsening your credit score, and losing money to late fees.
With a strong cash flow, you have the money you need to expand your business. Invest in a new truck, add another driver, and double your business’s potential. Your clients are happier than you can take on more work for them.
Handle the Downturns with Ease
When the industry goes through a downturn, you’ve successfully built up some cash and can handle the downturn better. When you do have work, you know you’ll get paid quickly.
Plus, costs increase during a slow period. You’ll find it easier to manage increasing costs like insurance, fuel, and repair costs when you have a strong cash flow.
Mitigate Risk
With business credit checks, you can research brokers and shippers before agreeing to work for them. If they have a troubled financial history, you walk away before accepting a job where you may never be paid. It makes it easy to grow your clientele without taking on excessive risk.
Track Financial Information Easily
When you work with a freight factoring company, you use an app for the simple submission of payment requests. You get an invoice that you can upload to your software and simplify accounting. You also have 24/7 access to the payment requests you’ve made, if they’re approved, and when to expect the funds to reach your account.
Pay Close Attention to the Additional Benefits You Gain with a Factoring Arrangement
Getting paid most or all the money you’re owed the same day is a major benefit. But you need to look at the additional benefits when choosing a freight factoring company.
Freight factoring payments go to your account, but you want to make sure the company also ties in fuel discounts. If you save money on every fill-up, it’s a key benefit as you pay less at the pump. As of 4/14/25, average diesel prices are at $3.58 a gallon. Gas prices are around $3.17 a gallon. Fuel costs are a substantial part of your trucking budget. The more you save, the better it is for your bottom line.
Enjoy having access to unlimited business credit checks each month. If you have a new broker interested in working with you, you should check their past payment history and experience in the business to ensure it’s a good risk. If the broker has a history of never paying clients on time, it may not be in your best interest to work with them.
Freight factoring lowers the amount of work you or your office staff must complete each week. With the factoring company handling invoicing and collections, your time is freed up for important tasks like route planning, marketing, and customer service. Happier clients lead to more work and word-of-mouth advertising.
Look for additional services like low-interest business lines of credit. These loan products are there if you need them, but you’re not obligated to draw from the available funds if you’re doing okay.
Generally, a business line of credit is ideal if it’s time for upgrades to your building or equipment, and you aren’t sure how much it’s going to cost. You have a maximum limit, but you don’t have to spend that much. You make payments on the amount you use. Compare that to a small business loan, where your payments cover the entire amount, whether you ended up needing that much or not.
Best of all, you have a working cash flow where you control when you are paid. If you have trusted clients that you know will pay responsibly, you don’t have to factor those invoices. With Saint John Capital, you can pick and choose which clients you have us handle and which you prefer to take care of.
Saint John Capital offers everything you need to build a strong cash flow and positive relationships with your clients. We pay you the same day, provided your request is submitted by noon EST and approved by our team. You have the cash you need to pay for fuel and emergency repairs when you’re on the road. Contact us today to learn more!
