Freight factoring provides trucking company owners or independent truck drivers get the cash they’re owed quickly. Traditional billing procedures require the generation of the invoice that’s mailed, emailed, or faxed to the broker or shipper. The terms for payment are shown on the invoice, and NET30, meaning pay in 30 days, is common.
A month passes before you get paid. If the client pays late, it’s frustrating as you have bills piling up, and you can’t keep pushing them off. Your workers need to be paid or work doesn’t get done. Your internet provider is going to disconnect you if you don’t pay. Without the internet, your business crashes. You need a strong cash flow to keep your business running smoothly.
When you enter a freight factoring agreement, you send your bill of lading to the factor. That company handles invoicing and collects payments on your behalf. You get paid as quickly as that same day, which eases your stress and makes it easier to pay your workers’ wages and all bills and business expenses on time. But, you need to understand how freight factoring payments are made and why no reserves cash advances are so important. At Saint John Capital, we believe you need to understand their value.
What Are No Reserves Cash Advances and How Do They Work?
A cash advance is a financial product where you get advanced payments of money owed on an invoice. Typically, a freight factoring company sets up cash advances where some funds are held in reserve in exchange for the advance payment. No reserves cash advances do not require a reverse of funds.
Suppose you have just delivered a trailer from a port to a warehouse for a company. They owe you $10,000 and usually pay a month later. You don’t want to wait. A freight factoring company advances you the money you’re owed, but a fee is removed. Plus, you might not get everything at once. If there’s a reserve, you might only get 90% right now. That other 10% is held in reserve. The fee you pay for freight factoring services is deducted from the 90% you get now, and you get that other 10% when your client pays. It would look like this:
- $10,000 is due, but there’s a 5% fee deducted from that amount.
- You will receive $9,500 in all, but 10% or $950 is being held in reserve.
- You get $8,550 now.
- When the client pays, the remaining $950 is released.
With no reserve, you get the full $9,500 immediately. That can be better for keeping a strong cash flow.
You do need to fill out an application. Any freight factoring company has to do its research as there is a risk if they don’t get paid by your client. Freight factoring companies offer arrangements that don’t always impact your credit, so they need to be careful. Expect that the companies you work with will undergo a business credit check. If your brokers and shippers have a history of not paying bills on time or at all, you’re unlikely to have your cash advance application approved.
What Are the Benefits of These Cash Advances?
The benefits are plentiful. Have you had to wait longer than expected to get paid? It’s frustrating, and the longer it goes on, the more stress you experience. You’re not being paid, and that makes it hard to pay your employee’s wages and insurances. If you miss a payment, you may face penalties from your state’s Department of Labor. Having money to pay important bills is everything.
A strong cash flow also helps you grow your business. You’re no longer facing late fees that eat into your profits. Start saving that money. Eventually, you have the funds you need to invest in new equipment like trailers and trucks.
You’re paying bills on time. Building your client list. Making more money. You might not realize how much that helps your credit score. Higher business credit scores help you more than you’d think. You’ll get lower interest rates in the future. It’s easier to get business loans when you need them. It also makes your trucking company look more appealing to new brokers, shippers, and even government agencies if you decide to drive FEMA loads and similar work.
What Are the Risks and Advantages?
There are pros and cons to no reserves cash advances. We’ll start with the pros.
- There’s no impact on your credit score. Credit checks are done on your client, not you.
- You get cash immediately, which keeps a strong cash flow for your business expenses and wages.
- There are no hidden fees.
- It’s a stress-free way to run your business.
However, there are also things to consider as it can be considered a negative.
- If your client doesn’t pay, you may be required to repay the amount you received.
- There are freight factoring fees to consider.
- You may not meet the eligibility requirements as no reserves cash advances aren’t always offered to new trucking companies.
- You have a contract you need to read over. Make sure you understand it. When a company fails to read and understand contracts, it can cause frustration and disappointment.
Tips for Choosing the Best No Reserves Cash Advance Provider
Not every freight factoring company provides no reserves cash advances. You have to decide if you’re okay with a company holding back some of the money you are owed until your client pays the invoice. If you want 100% now, you need to narrow your selection to specific factoring companies and ask these questions.
- What is your experience in the trucking industry?
- What do other clients have to say about your services?
- What are the fees for no reserve cash advance factoring?
- If your client fails to pay an invoice, what happens?
- Are there other services available with a freight factoring arrangement?
Saint John Capital is here to help you get paid quickly for the hard work you do. We have decades of experience in trucking. In addition to no reserve cash advances, we offer unlimited business credit checks, affordable business line of credit loans, and business debit cards. Complete the form to learn more about our factoring services.
