Trucking companies all over the U.S. and Canada rely on freight factoring to generate the cash flow necessary to operate their businesses. Freight factoring companies provide immediate funds for freight bills and invoices, so you don’t have to wait 30, 45 or 60 days for your customers to pay.
Trucking companies often work with a number of freight brokers such as C.H. Robinson, Echo Global and Worldwide Express. Freight factoring companies handle all your invoices, no matter how many customers you have. Freight bill factoring provides a practical alternative to negotiating quick pays for all your freight broker or shipping customers.
The majority of freight shipping in the transportation industry doesn’t require a full truckload (FTL). Instead, many separate shipments are combined and transported on one truck. This is called less than load freight shipping (LTL). Most of the nation’s largest trucking firms carry LTL freight including ABF Freight, FedEx, UPS and Old Dominion.
This shipping method is typically used for freight weighing between 150 and 15,000 pounds. They are too big to be handled by themselves and do not fill a truck. Small businesses benefit from LTL shipping because they ship fewer goods than larger companies. LTL shipping gives small businesses all the services professional shipping provides without the high cost for unused space.
LTL shipping is built on a hub and spoke system where local terminals are the spokes and distribution centers are the hubs. Many terminals are spread throughout the country. From each terminal, smaller trucks deliver and pickup shipments for customers. From the terminal, shipments are loaded onto line-haul trucks, which are driven to a destination terminal, where another small truck delivers to the end customer. Sometimes, rail cars are used for the delivery of freight between terminals.
LTL carriers are somewhat limited in the type of freight that they haul such as dry freight. But they are not limited to dry freight and may haul food products, refrigerated goods, liquids, livestock, automobiles, and industrial materials like steel. LTL allows small shippers to move their freight without paying for the entire trailer. Other shippers share in the cost and you only pay for your portion of the trailer.
LTL offers additional services such as lift gates, reweighing or reclassification, inside pickup and delivery and expedited shipping. LTL carriers provide all the tracking capabilities and information such as the bill of lading (BoL) number, PRO number (progressive number), PO number and shipment reference number.
Shipping rates are determined by several factors including the freight class, distance and special handling procedures. The freight classification is based on the shipment’s dimensions and weight, otherwise known as density.
Consolidated shipping takes place in a consolidation warehouse. Rather than using a hub and spoke system, consolidated shipping aggregates LTL shipments at a warehouse, where they are loaded onto a truck and delivered directly to multiple-stop final destinations. Consolidated shipping takes LTL shipments and turns them into a multi-stop truckload shipment.
Consolidated shipping is cost effective like LTL, but has less on loading and off loading than the LTL terminal to terminal system. It’s more difficult to find a consolidation carrier and less reliable than the more popular LTL system.
Freight Factoring Companies
Truckers and carriers issue a bill of lading to the shipper or freight broker to prove the receipt of shipment of goods. A bill of lading is used for customs and insurance, as well as invoicing shippers and freight brokers. Because it can take 30 days or more for shippers and brokers to pay, trucking companies regularly rely on freight factoring to avoid payment delays.
Freight factoring companies purchase the freight bills from the trucking company or carrier and immediately send cash in the amount of the freight bill, less factoring fees. So the trucking company gets paid immediately after they ship the goods and they don’t have to worry about collecting payment from their customers (shippers and brokers).
The factoring company handles all the collections, receivables accounting and reporting. Many freight factoring companies provide additional services including fuel cards and advances, load boards and mobile apps.