Last Updated on September 25, 2023
For trucking companies, few things are more important than ensuring you get paid in a timely manner. Maintaining sufficient cash flow for your operations is key for keeping finances in the black.
Well-designed trucking invoices can go a long way in helping you get paid quickly, but in times when money is needed as soon as possible, two good options to consider are factoring and Quick Pay.
Let’s take a look at Quick Pay vs. factoring so you can better understand which option could be best for your trucking business.
What Is Quick Pay in Trucking?
With Quick Pay, a broker quickly sends cash in exchange for a small fee.
Quick Pay for truckers is a payment option that many brokers within the transportation industry offer. Essentially, Quick Pay provides faster invoice fulfillment for a delivered load in exchange for a processing fee (which is usually 1-5% of the load rate).
Quick Pay brokers require several forms of paperwork before payment can be processed, including the bill of lading, invoice, and any other load documents. After the paperwork is submitted, it typically takes brokers anywhere from two days to one week to deliver payment.
Generally speaking, Quick Pay trucking payments allow carriers to be paid much faster than they would based on typical invoice terms (such as Net 30 or Net 60 terms). This can prove to be a big advantage for managing your cash flow. However, payment times and processing fees can vary significantly from broker to broker when using Quick Pay for carriers. Additionally, each broker will only do Quick Pay for their own loads, which can increase your paperwork and complicate collecting payments.
What Is Freight Factoring?
Freight factoring is a system in which a trucking company sells its unpaid invoices to a third party factoring company. The freight factoring company provides a cash advance for the invoices, with the invoice value typically delivered in just one to two days.
Similar to Quick Pay, trucking carriers submit their invoices to the freight factoring company, which evaluates the creditworthiness of the clients and then advances 85-100% of the full invoice value. The freight factoring company will then follow up with the broker or client to ensure the invoice gets paid. After the invoice is paid, the carrier receives the remainder of the invoice payment, minus the factoring service fee. Average trucking factoring rates typically range between 1-5%.
Thanks to the added services a freight factoring company provides (such as following up with clients that owe payments), you can save time on back-end operations by not needing to track as many invoices. Freight factoring is also incredibly flexible — you can factor as many or as few invoices as you want, even with multiple brokers involved.
One drawback to be aware of: if the customer doesn’t pay the invoice, your business might be responsible for repaying the cash advance, although that depends on whether you’re using recourse or non-recourse factoring.
Quick Pay vs. Factoring
Here’s a quick breakdown of Quick Pay vs. factoring:
|Brokers only offer Quick Pay for their own loads
|Freight factoring agencies can factor any invoice from any broker or customer
|Payments are made directly from the broker; trucking companies must keep track of invoices
|The freight factoring company provides an advance based on the value of an unpaid invoice; they then collect the invoice payment from the client
|Fees are usually 1-5% of the load rate
|Fees are usually 1-5% of the load rate
|Payments available in two to seven days
|Payments typically available in one to two business days
|Need to manage payments with multiple brokers when you want to use Quick Pay
|Can work with one freight factoring partner for all your invoices
|Not a loan — your invoice is paid by the broker, minus Quick Pay processing fees
|As a cash advance, you could be responsible for repayment if the client never fills the invoice
Should I Use Quick Pay or Freight Factoring?
Getting the cash you need quickly can ensure that you are able to pay drivers on time, manage other operating expenses, take on new customers, run more lanes, and even improve your credit score. Most importantly, these payment options can help you access needed capital while still maintaining equity in your business, since you won’t be taking out a loan or selling equity.
So, how does Quick Pay vs. freight factoring balance out in the end?
When you need fast cash, streamlined paperwork, and payment flexibility, freight factoring is generally going to be the better choice. You’ll get paid faster, and you can pick and choose which invoices you want to factor, all with a single provider.
Quick Pay factoring isn’t actually factoring. Instead, Quick Pay for truckers involves getting a prompt payment from a broker. Not only do payments take longer, but you need to set up Quick Pay on a case by case basis with each broker you work with.
Ready To Start Freight Factoring?
If you’re ready to start factoring or simply want to learn more about the process, fill out our free freight factoring quote form or give us a call today at 205-590-9471. Our representatives would be happy to discuss how altLINE can help improve your cash flow.
Jim is the General Manager of altLINE by The Southern Bank. altLINE partners with lenders nationwide to provide invoice factoring and accounts receivable financing to their small and medium-sized business customers. altLINE is a direct bank lender and a division of The Southern Bank Company, a community bank originally founded in 1936.