Factoring can keep Company’s and Independent Contractor’s Cash Flowing in Uncertain Times

One of the most difficult things about owning and operating a small trucking business is cash flow. Company drivers and independent owner-operators who are leased to carriers benefit from a regular settlement check. Whether the cash comes weekly, bi-weekly, monthly or on some other schedule, it arrives somewhat regularly.

Independent owner-operators who have their own customers don’t get that benefit. They often wait 30, 60, 90 days or more for payment to arrive from their customers. While they wait, the bills keep coming, the fuel tank needs filling and the other expenses of operating a trucking business continue unabated.



That’s where factoring can make a major difference.

“There has never been a more important time to take advantage of factoring,” said Bob Dilliplaine, Business Development officer of Orange Commercial Credit. “A factor provides cash flow on a regular and more importantly, predictable basis.  You don’t have to guess or lose sleep over when that payment will arrive.”

According to Dilliplaine, the economic turmoil caused by businesses around the world shutting down for the COVID-19 pandemic has had a severe impact on payment for services such as trucking.

“The pandemic is causing business failures, and those that stay in business, their credit lines might be suffering,” he explained. “Some are experiencing longer cycle times, meaning the independent owner-operator has to have more cash to continue operating until the customer or broker pays.”

Factoring services like O.C.C. pay the independent owner-operator for loads hauled, taking on the responsibility of billing the customer and collecting. For these services, the factor keeps a small percentage of the load revenue.

“Along with providing the working capital, the trucking company needs to operator, O.C.C. act as the owner-operator’s billing and collections representative,” Dilliplaine explained. “We’ll calculate and mail the invoice and follow up with any collections activity necessary.”

Dilliplaine is straightforward about the use of a factoring service.  “Ideally customers would pay promptly and you wouldn’t need a factor, but that’s not the current situation,” he said. “If you do not have sufficient funding to keep your business operating you have issues when repairs are needed, you will miss scheduled appointment and ultimately lose customers and the opportunities to grow.”  Keeping as much revenue as possible in the business is a best practice, but the amount of money lost by unpaid invoices can cause serious damage.

There are two main types of factoring, broken down by how much responsibility the owner-operator is willing to accept. “Recourse” factoring means that the factor can ask the owner-operator to pay back cash received if the factor can’t collect from the customer. In “nonrecourse” factoring, the factor pays the owner-operator and assumes all responsibility for collection. If the customer doesn’t pay, the factor loses out, not the trucker.

One thing to look for in a factor is whether the company required you to factor all your customers.  Some factoring services require the owner-operator to turn over collection of every load hauled. “Why would you want to factor customers that pay in 7 days?” he said.  OCC allows you to pick and choose which customers you want to factor. 

“Ancillary services offered by factoring companies add more value to the service. Checking the credit of a potential customer or broker can be critical. Dilliplaine said O.C.C provides free credit checking to its clients, helping ensure they are doing business with customers that have a solid reputation for paying.

The difficult economic climate caused by COVID-19 leads some truck owners to take financial risks they otherwise wouldn’t, and that’s another area where a factor can help.

“A common practice we’re seeing is owner-operators using credit cards or short term high-interest loans, to pay for fuel and operating expenses,” Dilliplaine explained. “If you are relying on credit cards or expensive loans, just know there is a better option out there. 

Bottom line is that Orange Commercial Credit will advance you up to 98% of your invoices, within twenty-four (24) hours. You get ALL your money up front with NO Reserves, NO Hidden Fees, No Long-Term contracts and no headaches.  O.C.C. has been helping small trucking companies nationwide since 1980.  Reach out to Dilliplaine to see what he can do for you.