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Sep 12, 2017 • Carriers

Bank Loan vs Freight Factoring - Which is Best?

Bank Loan vs Freight Factoring - Which is Best?

Know the differences between a bank loan vs freight factoring before making a decision to improve the cash flow of your trucking company.

Bank Loan vs Freight Factoring

So you’ve hauled a few truck loads recently but your clients aren’t paying you for another month and it’s limited your ability to cover your operational costs or even haul another load. A bank loan might be an option that comes to mind but it may not be the best choice for your trucking company. Instead, freight factoring is a credible solution that can deliver better results for your cash flow problems.

See a bank loan is based on your creditworthiness, ability to make payments, collateral and involves additional interest charges and fees to get funding.

On the other hand the advantages of freight factoring can tip the scales. Freight factoring is the process of selling your invoices for immediate payment to you less a small percentage fee of the total invoice. What does that mean exactly? It means you get paid now while the freight factoring company is responsible for collecting the funds from the invoice (if it’s non-recourse factoring).

Keeping your trucking company running is no easy task. For one, the business model revolves around you covering upfront costs for things like fuel and if you run a small fleet of trucks, then you have to take into account driver costs such as salary, insurance, and taxes.

That’s not taking into account operational costs like truck repairs, which can cost you over $15,000 annually (according to ATRI reports).

If you need, we have a quick refresher on what is freight factoring.

What is a Cash Flow Loan?

Unlike a typical bank loan that a trucking company might take out, a cash flow loan does not necessarily involve credit history, collateral or the company’s profits. Instead, cash flow loan financing has payments determined by the future cash flow of the trucking company with funds lent for working capital.

While a cash flow loan may be easier to obtain if your company shows the ability to have the future income to cover the load, the downside is that a cash flow loans incur a much higher interest charge than a typical business bank loan.

This brings us back to freight factoring.

See, freight factoring is debt-free financing that provides you with funds without having to repay anything.

Is Freight Factoring Faster Than a Bank Loan?

Yes! choosing to factor your loads with a freight factoring company can get you paid in as little as one day. You don’t have to worry about length paperwork or processing before getting funds.

When you choose to factor with a reputable non-recourse freight factoring company such as InstaPay you ARE NOT charged interest or any hidden fees and there’ no minimum volume commitments or length of time required to factor.

Factor as much as you like, whenever you like and don’t worry about those pesky collections from your dodgy clients, we handle collections too. It’s one of the biggest advantages of non-recourse factoring vs recourse factoring.

Just send you bill of lading and rate confirmation and get paid. It’s the easiest way to streamline your cash flow and grow your trucking company.