Freight Factoring and Invoice Financing for Truckers

Freight factoring and invoice financing can serve as stress tonic for truckers. Adam Longacre, owner of Scott & Longacre Trucking, routinely waits 60, 90 or even 120 days for customers to pay. “This can cause problems when you’re trying to make payroll, pay all your fuel bills and repair bills. You need to pay those right away,” says the Pennsylvania small-business owner.

In response, Longacre turned to financing that could keep his small business humming while he was waiting on customer payments.

What is freight factoring?

Freight factoring helps trucking companies manage the cash flow gaps that are common in the industry. The factoring company advances you money based on your invoices, or accounts receivable. Because invoices represent income you’ve earned, some lenders will let you use this funding method even if your credit or revenue isn’t stellar.

HOW IS IT DIFFERENT FROM INVOICE FINANCING?

Invoice financing is a similar option; it also advances you cash for your invoices but differs mainly in its repayment method.

With traditional factoring, fees can be high, a long-term contract is often required, and you have to submit invoices via fax or regular mail. Below, NerdWallet compares two alternatives to the traditional method — BlueVine’s freight factoring and Fundbox’s invoice financing — which leverage technology to make the process faster and more flexible.

	BlueVine	Fundbox
Type of financing	Freight factoring	Invoice advance
Fees	Typically 5% flat fee; equivalent to between 20% and 60% APR, depending on how long it takes to repay the advance	$482 to $682 in fees on a $10,000 invoice over 12 weeks; equivalent to between 43.95% and 63.73% APR
Amount advanced	Usually up to $250,000; up to $500,000 for some customers	Typically $500 - $30,000
How much is advanced upfront?	95%	100%
Repayment terms	Same as the payment term in each invoice; BlueVine allows invoices that are net 15-90 days	Equal payments over 12 weeks
Qualifications	At least 530 FICO score, at least $75,000 in annual revenue, in business for at least 3 months	At least 3 months of invoice history
Where to apply	Apply now at BlueVine (BlueVine review)	Apply now at Fundbox (Fundbox review)

Compare other lenders to determine which is the right fit for your small business at NerdWallet’s Small-Business Loans page.

Best bet for larger trucking companies: BlueVine

BlueVine typically has a funding limit of $250,000, although some users can qualify for up to $500,000. It might be most useful for larger operations, although new businesses can qualify. The lender only requires clients to have been in business for three months. And it doesn’t mandate installment payments, so it’s a good solution for trucking operations with limited cash flow.

BlueVine prefers lending to companies with at least $100,000 in annual revenue and business owners with personal credit scores of 530 or higher. It also targets companies with invoices that are to be repaid within 15 to 90 days. Fewer than 15 days and it’s not worth it for the business owner; over 90 and it’s too risky for BlueVine, says Ed Castaño, vice president of marketing.

HOW BLUEVINE ADVANCES CAPITAL

1. Apply online, link your account, get your advance.

Once you apply online and are approved, link your BlueVine account to your accounting or invoicing software and select the invoices you want advanced. BlueVine must approve each invoice. When it does, it will buy the invoice from you and advance you 95% of the total amount. You’ll receive cash for your first invoice in as little as 24 hours, and for future invoices in as little as two hours.

BlueVine charges a flat 5% fee. When your client pays the invoice, the lender uses the funds to repay the advance and its fee.

2. Choose notification or non-notification.

In traditional freight factoring, your client pays the factoring company directly. This process is called notification. But in non-notification factoring, your clients pay the company through a P.O. box (for checks) or bank account (for electronic payments) registered under your name. You might prefer non-notification factoring if you don’t want clients to know you’re using the service.

BlueVine offers both types of factoring, though it may not allow non-notification for larger invoices.

PROS AND CONS OF BLUEVINE FREIGHT FACTORING

Pros	Cons
No installment payments; great for those who don’t want to make weekly or monthly payments. A non-notification option for some users, so clients won’t know that the company used invoice factoring. No long-term contracts for the factoring services, unlike there are with traditional freight factoring companies.	Borrowers receive 85%-90% of their invoices as an advance and receive the remainder after the client pays, rather than receiving it all at once. New or small businesses might have to start with the notification option, in which clients pay BlueVine directly.

Best bet for smaller trucking companies or owner-operators: Fundbox

Because Fundbox’s maximum invoice amount is $30,000, its advances are better suited to smaller trucking operations or owner-operators. In addition, the company evaluates prospective clients on multiple factors, not just their revenue or credit scores, says Jordan McAvoy, vice president of marketing.

Fundbox is also a good choice if you don’t want your customers to know you’re using financing, since your customers will continue to pay you directly. McAvoy calls Fundbox “a back-end solution for the small business to better manage its cash flow and access to working capital.”

Fundbox isn’t a factoring company. It advances capital on invoices, functioning like a cash-flow loan. That’s great for invoice-heavy businesses that need help filling cash-flow gaps. But you don’t repay in full once the invoice is paid; you make equal payments over a 12-week period. If you’re having trouble making ends meet, it might be difficult to make these weekly payments.

HOW FUNDBOX ADVANCES CAPITAL

1. Apply online, link software, request an advance.

When you apply for Fundbox, you’ll link your accounting software. If you’re approved, which can take a matter of hours, you can request to have invoices advanced. Once an invoice is approved, Fundbox advances you 100% of the money you’re owed.

2. Repay in weekly increments.

Loan payments and fees are debited automatically from your bank account over 12 weeks. The so-called clearing fees — a combination of transaction fees and advance — are determined by your business health and the specifics of the invoice. For a $1,000 invoice, they range from $52 to $72 over three months, according to Fundbox. The more you use the company, the lower the fee. If you repay earlier than 12 weeks, you won’t pay fees on the remaining weeks. Once your customer pays you, you can use that money to repay the remainder of the advance.

PROS AND CONS OF FUNDBOX INVOICE ADVANCES

Pros	Cons
Borrowers get approved in as little as three hours and paid for invoices in as little as 24 hours. Fundbox advances 100% of approved invoices. No early repayment penalties. Clients don’t know trucking companies have advanced the invoices. Fees decrease for long-term Fundbox users.	Borrowers repay in installments over 12 weeks, which may be hard for some businesses. The maximum invoice amount is $30,000, which might be too low for larger operations.

There are many traditional freight factoring companies in the marketplace, but BlueVine and Fundbox offer fast and easy online financing options. Depending on the size of your trucking business, one of these companies could help you keep your fleet on the road.

Find and compare small-business loans

To compare Fundbox and Bluevine with other lenders, check out NerdWallet’s small-business loans page. We gauged lender trustworthiness, market scope and user experience, among other factors, and arranged them by categories that include your revenue and how long you’ve been in business.

Compare business loans

To get more information about funding options and compare them for your small business, visit NerdWallet’s best business loans page. For free, personalized answers to questions about financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page.

Emily Starbuck Crone is a staff writer at NerdWallet, a personal finance website. Email: emily.crone@nerdwallet.com. Twitter: @emstarbuck.

Benjamin Pimentel is a staff writer at NerdWallet, a personal finance website. Email: bpimentel@nerdwallet.com. Twitter: @benpimentel.

This post was updated. It originally published Aug. 11, 2015.