Becoming an Owner Operator: Invoice Factoring 101

Factoring Process Diagram

This week’s post aims to explain the benefit of factoring to an owner operator’s operation. Unfortunately, it only pertains to those who have chosen to operate under their own authority. However, it never hurts to take a read, especially if obtaining your own authority may be in your future.

What is Factoring?

According to the Business Dictionary, invoice factoring is the selling of invoices to a third party company to improve cash flow. When a business uses invoice factoring, it benefits through an immediate boost to cash flow, while at the same time eliminating the back office support needed to manage the accounts receivable process.

Why Choose to Factor?

Most truckers use factoring to improve and provide a consistent cash flow for their operation. Factoring provides immediate funding instead of the typical wait time of 30, 60, or even 90 days to get paid. In addition, factors usually provide back office support to your business by collecting the invoices and monitoring your customer’s credit.

How Does it Work?

Factoring sounds much more intense than what it actually entails. There are only three main tasks that need to be completed before receiving same-day funding:

  1. Deliver the load from Point A to Point B
  2. Assemble rate confirmation and Bill of Lading
  3. Submit your invoice to a factor
  4. Receive same-day funding

Benefits.

Without question, factoring has become a widely accepted means of business financing worldwide. It is considered an ideal way to provide strong cash flow from companies of all sizes. While benefits will vary from business to business, factoring usually provides a source of consistent funds and healthy cash flow.

  • Generates cash flow immediately
  • No debt created
  • Simple, no cost approval process
  • New business capital
  • No loss of business equity
  • Free credit checks on your clients
  • Invoice processing
  • Enhanced credit
  • Increased productivity
  • Reduced accounting costs

Requirements.

As long as you operate in business or governmental sales and service, then beginning to factor with a third party company should be a breeze. However, there are some other basic requirements that many factors require you meet.

  • Recognized as a business
  • Sell to commercial or governmental entities
  • Ensure your client has good credit
  • Invoices free of liens
  • No open bankruptcy
  • Clear background check

If you would like more in-depth information about factoring, check out Concept Financial’s Factoring White Paper.

Otherwise, contact Concept Financial today to get your cash flowing.

Leave a Reply

Your email address will not be published. Required fields are marked *