Cash flow challenges can make it tough to keep your trucks rolling. That's true whether you're a American startup trucking company, experiencing rapid growth or going through a time of transition.
Factoring is an alternative form of financing that creates cash flow even when you wouldn't otherwise qualify for a traditional business loan or line of credit. Flat fee factoring is a form of factoring that's growing in popularity with truckers and other businesses in the US transportation industry because of its simplicity and ease of use.
Flat fee factoring
Like its name suggests, flat fee factoring is a form of factoring where your fees are based, upfront, on an agreed upon percentage of your invoice amount. ALL IN. There are no additional fees, no variables like days outstanding to impact how much you'll net from the transaction.
Flat fee factoring brings many benefits to your trucking and transportation business:
- Know your fees upfront – no more guessing
- Simple to qualify for
- Simple to understand
- Simpler to plan and predict cash flow
- 30,60, or 90 daysÉyour fee doesn't depend on how long it takes your customer to pay
- Designed specifically for the US trucking and transportation industry
How is flat fee factoring different from regular factoring?
How your fee is calculated. With flat fee factoring, your fee is one defined percentage of your invoice amountÉregardless if your customer takes 30, 60 or 90 days to pay. With regular factoring, your fee is still based on an agreed upon percentage. The difference is that the percentage is a daily amount and applied to each day that your invoice is outstanding. With regular factoring, the more days outstanding, the higher the fee. With regular factoring, you won't know upfront the true amount, because it can't be calculated until after your customer pays.
When your fee is paid. For flat fee factoring, your fee is deducted upfront from your advance amount. For example: Assume a $1,000 invoice is flat fee factored at 2.99% with a 95% advance. The flat fee of $29.90 would be deducted from your 95% advance ($950.00 minus $29.90) to give you cash-in-hand of $920.10 as soon as you issue an invoice. This makes account management predictable and easy to monitor. When the customer pays your invoice, you'd receive the balance of the $50.00. For regular factoring, your fee varies dependent on days outstanding and isn't deducted until your customer pays. This can make account management unpredictable and confusing.