I want to hold someone responsible for the mess our economy is in. It makes my teeth hurt to know that the very stewards of our banking industry walked away with huge bonuses even after driving the stock market and the housing industry to its knees. The resultant fallout from their excesses of questionable loans and iffy assets is that other enterprises like trucking are being locked out of lines of credit that bridge the gap between invoices and payments.
The American Dream is not dead but it sure is taking a butt kicking these days. Between the foreclosures and disappearing retirement accounts, it is enough to make you want to opt out until it is all over. Unfortunately, in the trucking business there is no place to hide.
The average truck driver is expected to wait 30, 60, sometime 90 days to receive payment for a delivered load. In the event that a carrier cannot wait, a negotiation for an 8-10% discount for quick payment is often reached, forcing the driver into smaller and smaller paydays. Call it survival of the fittest if you want, but I think it is taking advantage of the small carrier during this credit squeeze.
Factoring is a real alternative and a simple financial solution for the trucking industry. In practice, a driver sells his freight invoice to a factoring company who advances the money quickly, minus a fee as low as 1%. With an immediate advance on invoices, profits accumulate quickly and allow the trucker to get ahead of payments, take advantage of discounts, negotiate for higher-paying loads and extend credit terms.
No, the American Dream is not dead, but we cannot wait for Washington to solve our problems or fix what is currently broken. As much as we would like to identify who is responsible, we do not have that luxury because there are loads to deliver, bills to pay and no matter what, we keep on truckin’.
A transportation industry expert, John Downing is the Vice President at Freight Capital who specializes in financial solutions for the trucking business.
