To those who are new to the world of trucking, factoring may seem like a complicated issue. However, many people find it a real lifesaver once they get to know what it’s really about. Some use transportation factoring to boost their business. Others set up new companies providing freight factoring services, and help other businesses to thrive.
Such big industry names include Henry Malukas and Daiva Malukas, owners of HMD, who have recently established a new entity to add to the already existing 7 other companies in the group. Meet HMD Financial, which will provide high-quality factoring services to respond to the skyrocketing demand in the market and ensure a steady cash flow to trucking ventures.
But before we get into the details of this new venture, let’s start from the top and see what factoring in trucking is.
- What Is Factoring in Trucking?
- About HMD Financial
- Freight Factoring Services
- Freight Factoring Company Application Process
- How Much Does HMD Financial Charge?
- Discover the Exciting World of Factoring
What Is Factoring in Trucking?
Freight factoring is a service that allows truckers to sell their invoices and get paid for completed deliveries within a very short time. You no longer have to deal with Net 30, 60 or 90 payment terms, or wait days to cash your invoice. You just deliver the loads, and the factoring company does all the waiting and collects the money. Read our article to learn more about what is factoring in the trucking industry.
Naturally, this service is not provided free of charge. But fees are usually a relatively small commission that rarely exceeds 5% of the invoice amount. For such a small fee, you ensure a steady cash flow to your company and no longer need to survive from payment to payment.
By using the service, you get secure funding of:
- fleet maintenance;
- hiring new truck drivers;
- even new trucks.
Secured in this way, you can take on new contracts and catch every profitable opportunity that comes your way. Thanks to the solid financial backing, companies that use factoring services can attract high-profile clients, perform more deliveries by expanding their fleets, and eventually sell even more invoices to a factoring company — rolling them like a snowball. Statistics from various factoring clients across the USA show that this is an opportunity to double revenue within a single year. Sounds great, doesn’t it?
So, what happens if you sell an invoice, but the freight company fails to collect money from your client? How does this work?
There are two types of factoring that deal with this situation differently:
- recourse factoring;
- non-recourse factoring.
In the case of recourse factoring, if the company fails to cash the invoice, you have to buy it back. However, there are sizable bonuses that outweigh these risks:
- much lower factoring rates;
- higher advance rates;
- faster access to cash. Sometimes, even a single day can be crucial when securing a profitable contract.
With non-recourse factoring, you will not have to buy the invoice back. However, that alternative comes at a price:
- the fee is usually higher;
- the credit check takes longer, as it requires a very careful examination of the carrier’s clients;
- the choice of clients is also limited, as the payment history requirements are more stringent.
In either case, the cost is lower than that associated with borrowing from the bank, as in the latter case, you have to both return the principal and pay the interest. Taking out several loans in a row might lead to a situation where the accumulated interest rates become a heavy burden, especially if the cash flow is interrupted due to market fluctuations. This is a vicious circle that no one is insured against.
Factoring in a Nutshell
To summarize, when you use factoring, you get your well-deserved dough and pay a commission that is by far smaller than the amounts typically charged by banks. This option offers a higher level of protection to your business than a bank loan, as you can sell any number of invoices, without being restricted by high-interest payments and secure your capital.
About HMD Financial
Choosing a reliable partner is key to a successful factoring journey. You will find a great number of factoring providers, offering different rates, bonuses, application processing times, recourse or non-recourse factoring options, etc.
In that multitude of options, we suggest you pay attention to HMD Financial, a factoring company for truckers. This is a new, but rapidly growing, factoring company.
Established way back in 1998, HMD has grown from a small, family-owned freight hauling business to a large group of companies that provides services to both shippers and countless owner-operators alike. The group currently consists of several well-known names: HMD Trucking, HMD Financial, HMD Transport, HMD LLC, HMD Motorsports, HMD Bar and Grill, and Benefit Trucking.
HMD Financial is a newcomer to the group, but it is backed by the other HMD businesses’ combined twenty-four years of experience. This can be called a true family business, as the permanently expanding structure of the group has been owned by the same founders throughout its history: Henry Malukas and his wife Daiva Malukas.
We operate out of the Midwest, with headquarters in Chicago and a few other offices, including one in Indiana. Our geographical reach covers all of the US, offering a range of online services via our website and app, which ensures a very simple procedure with zero red tape — always appreciated by the practical people in the truck driving business. For our more conservative customers, we offer the possibility to visit us at 10031 Virginia Ave, Chicago Ridge, IL 60415.
HMD Financial is growing exponentially, as more and more customers turn to transportation factoring for stability and an uninterrupted cash flow in these uncertain times.
The company enables its clients to receive up to 99% of qualifying account receivables within a single day of submitting their financing request, without hidden fees, tricks, or fine print.
Freight Factoring Services
Apart from buying invoices, freight companies offer many supplementary freight factoring services that help you run your business more efficiently, save money, and deal with fewer risks.
Here are the most popular ones:
- Credit checks. This procedure is conducted for invoices before the purchase, mostly in case of non-recourse factoring.
- Back-office tasks. Basically, you are exempt from all the paperwork that starts after the customer signs the invoice. Data storage, payment collection, and preparation of documents are done without your involvement.
- Fuel and tire discounts. Many factoring companies offer fuel cards that carry a significant discount. Tires can also be bought and repaired cheaper within a network of partner shops.
- Truck insurance. Factoring companies often have a team of insurance agents to provide their clients with high-quality, affordable coverage.
- Truck and equipment leasing. Factoring companies are interested in more invoices from reliable clients. That is why they are ready to lease the required equipment to boost your deliveries.
- Application via a website or mobile app lets you submit your documents with one click. Many companies offer 24/7 customer verification, so you can conduct financial operations at any time.
Freight Factoring Company Application Process
The factoring process is very simple and usually takes less than 24 hours with recourse companies. Below is a detailed description of the application process:
- First, the trucking company can contact a freight factoring company for a preliminary credit check. The factor checks the trucking customers’ payment history and determines their credibility. During the initial contact, they also check whether a trucking company meets the factoring requirements. These are quite simple: a minimum of six months in business, and an invoice due date less than 90 days away.
- After deciding to go for the factoring option, the trucking company should notify its clients that the payment for services will be collected by the freight factoring company. Most trucking customers are familiar with the practice and appreciate the smooth collection process.
- Upon successful delivery, the customer signs the invoice. A copy of the signed invoice, a rate confirmation, and a bill of lading are forwarded to the factoring company.
- The representatives of the factoring company contact the trucking customer to get confirmation that the cargo was delivered.
- As soon as the factoring company approves the invoice, the agreed-upon advance payment is transferred to the trucker’s bank account. The rest of the cash net of a small commission is reserved until the trucking customer pays the full amount of the invoice.
- When the factoring company receives the amount due, the reserved funds are sent to the trucking company.
How Much Does HMD Financial Charge?
HMD Financial is a bona fide factoring company for truckers, so we charge only 1–3% for our services — as compared to other vendors in the market who charge up to 5% — and pay up to 97% of the invoice value in advance.
Apart from a potential whopping 99% upfront payment, we offer an ultra-fast turnaround. You get the money in your bank, regardless of location, within 24 hours.
Discover the Exciting World of Factoring
To sum it up, freight factoring is a service that has evolved to help small and mid-size companies to boost their potential and successfully compete in the market. It can be a solid method of protection and financial backup for the vulnerable trucking business.
If you are still undecided about using freight factoring, feel free to contact HMD Financial for professional advice. We will be happy to provide every detail you need, introducing you to a whole new world of secure financing. We hope that our services will take you one step closer to success. There is only one chance to check if this is true, and that is to become our customer and enjoy the convenience and efficiency of the service we provide.