When you’re running a trucking business, cash flow is everything. Waiting 30, 60, or even 90 days for brokers and shippers to pay can slow you down. That’s where factoring can help advance your freight bills. But what about advance rates? Let’s break it all down.
What Is Factoring?
Factoring is a financial service where you sell your unpaid invoices to a factoring company. In return, they pay you most of the invoice amount upfront, based on your advance rate, and usually within 24 hours. This gives you immediate working capital to cover fuel, maintenance, and other expenses.
How Does Factoring Work?
Deliver your load safely and promptly.
Submit your invoice to the factoring company.
Get an advance within 24 hours.
Receive the remaining balance after your customer pays.
What Is an Advance Rate?
A factoring advance rate is the percentage of your invoice that the factoring company pays upfront. Advance rates typically range from 70% to 90%. For example, if your advance rate is 90% on a $1,000 invoice, you’ll get $900 immediately. The remaining $100 (minus factoring fees) comes after your customer pays the factoring company.
Calculating the Advance Rate
Invoice Amount x Advance Rate = Upfront Payment
Invoice Factoring Calculator
Factoring Breakdown
Why Are Factoring Advance Rates Important for Trucking Companies?
High advance rates mean more cash in your hands faster, which helps you cover fuel costs without delays, keep up with truck maintenance, and take on more loads without cash flow stress.
Common Misconceptions About Advance Rates
Higher advance rates mean higher fees: Not always. A good factoring company offers competitive advance rates and low fees.
Factoring is too expensive: The cost depends on your factoring rate (or factor rate), which is usually a small percentage of the invoice – much less than the cost of missing loads because you’re low on cash.
Full advance rates are best: Some factoring companies offer full advance rates. While this might seem like the best option, it limits the number of your customers that are eligible for factoring.
How Much Does Factoring Cost?
Advance rates are one part of the cost of factoring equation. The factoring fee is the other part, and one standard invoice factoring rate doesn’t fit all. Factoring fees vary, and there are flat, tiered, and volume-based rate options, each with its own advantages and disadvantages. Also, there are recourse and non-recourse factoring agreements that determine the overall cost.
How to Choose the Right Factoring Company
Choosing the right factoring company for your needs is super important for your trucking business success. Consider these tips when you’re on the search:
- Advance rates – When evaluating a factoring company based on advance rates, choose one that understands your needs and customizes their services to promote your trucking success.
- Contracts – Does the factoring company require long contract terms? Are there extra or hidden fees? Familiarize yourself with the fine print so that nothing comes as a surprise.
- Multiple offers – Entertain and compare multiple offers for factoring. That’s how you shop smartly.
- Customer service – What does the factor’s customer service reputation look like? If you know anybody that’s done business with that factoring company, ask. Word-of-mouth can provide powerful information. If not, do a little cyber research.
- Reviews – Read online reviews from multiple sources.
Ready for Apex Capital, America’s Favorite Factor?
What are the benefits of factoring with Apex? We offer custom advance rates, world-class customer service, and flexible contract terms. At Apex, we treat you as a human being and not a number. You will have a dedicated account executive that will help guide your company to trucking success. You’ll also have unlimited access to a slew of services, from 24/7 credit checks on brokers and shippers and our blynk® digital payment system to our Apex Mobile Factoring™ app and Account Management Portal (AMP).
Get paid on time for the loads you haul with Apex Capital. Visit our website or give us a call at 855-369-2739.