Truckers criss-cross the country hauling everything from grocery store produce to electronic items for retailers, moving 71 percent of U.S. freight tonnage this way in 2017. But despite the high demand for such services, small operators typically struggle with cash flow problems. They operate under slim margins, often making it difficult for them to afford necessary payments as they wait for their invoices to be paid.
“If it’s a two-truck company and one of your trucks breaks down, then you’ve lost the ability to generate half your revenue.” said Brian Calgren, chief strategy officer of truck factoring company Apex Capital. “If margins are thin, how do you overcome that and stay in business?”
Carlgren and Apex chief information officer Jerry Wallace recently spoke with PYMNTS about how faster payment solutions are key to keeping truckers on the road.
Raising the speed limit on payments
The lack of immediate compensation can be a big problem for trucking companies, which often issue invoices with 30-day repayment timelines. Though most shipping clients reliably meet these terms, Carlgren and Wallace said truckers can still struggle to handle necessary purchases like insurance, payroll and refueling supplies while they wait.
“It’s a very capital-intensive industry,” Carlgren noted. “So, by the time you drop a load, you’re already out a lot of … money. To get the next load moving and fuel in the truck, [sometimes] you need to get paid on what you just delivered.”
Companies like Apex help address these issues by offering cash flow assistance and factoring services. It assists in the latter process by buying unpaid invoices from transportation companies at discounted prices. This gives truckers quick, sometimes same-day funding, while the factor collects revenue once the invoice is paid in full.
Apex’s trucker clients can elect to route factor funds onto company-provided closed-loop fuel cards restricted for use at truck stops, or they can receive payments directly into their bank accounts. Money is sent through wire or ACH transfers when clients choose the latter option, and truckers can access the funds once they settle. These settlement timelines are beholden to banks’ often-limited operating hours, however, which can be problematic for drivers who have immediate purchasing needs.
A recent partnership with financial services provider Fiserv is helping Apex develop a solution to enable the instant transfer of funds into bank accounts. Wallace said the option is increasingly in demand because it fits well with truckers’ on-the-go workstyles and can assist them with emergency expenses.
Making service mobile
Transportation companies need more than just quick, 24/7 payments, though. They also want to request their funds without requiring access to computers or the internet, meaning smartphone-ready factoring services are critical.
“By their nature, trucking companies are mobile,” Wallace said. “So, giving them tools that can be present with them [wherever they are] is key to [their] being funded fast.”
Apex offers an app that allows customers to photograph and submit their invoices immediately after they deliver their loads. Truckers can also consult the mobile solution for information about nearby fuel stops and prices, as well as check on their invoices’ statuses.
Factors versus FIs
Factoring is one option available to truckers, but some instead turn to banks for loans. Factors can stand out among the competition by specializing in particular industries and offering invoice management supports.
“If all we were doing is giving money, sure, you [should] go to a bank,” Wallace said. “It doesn’t make sense to pay factoring-type rates for the same money you could get from a bank. It’s all the other things we do that bring the value to what you pay.”
Factoring companies shoulder the work involved in getting invoices paid, for example, though truckers could be financially responsible for unpaid balances in certain situations. Factoring firms also often provide services like invoice follow-ups and status tracking. Such offerings can be helpful to the many small trucking operations in which business owners are also drivers, leaving them with limited time to devote to invoice management.
In addition, factors’ close interactions with particular industries enable them to better assess risk levels involved with specific invoices, making them more likely than traditional FIs to accept these kind of deals.
Steady cash flows are critical to helping trucking companies operate smoothly. Faster payment solutions like mobile factoring with instant payouts can be important to fueling these transportation businesses and the many retailers relying on them to move goods.