According to a recent ATA report, freight rates in the United States rose by 28 percent year over year, indicating the potential for growth within the trucking industry. Zooming into the more granular analysis, the same report showed a two percent month over month decline, indicating that rates are starting to slip even as we enter the fourth quarter rush. However, there are two sets of data to understand, both on the macro level, as well as the tangible level that impacts trucking companies in the here and now.
Demand and Capacity
Depending on how the data is analyzed, there is an argument to be made that demand has dropped, especially if one focuses on the drop in rates over the summer. The truth is that demand is still there. People still need school supplies, clothes, consumer electronics, and groceries. The big difference over the past few months is that capacity has increased. Supply lines are not experiencing the bottlenecks they were just a few months ago, which has opened up the ability to get shipments to consumers. With an abundance on the supply side of the equation, this could go a long way toward indirectly combating inflation by lowering prices.
Increased capacity is good for the economy in the macro picture, but down the ground, trucking companies are still struggling with a driver shortage to move shipments from one place to another. According to the ATA, the trucking industry is dealing with a driver deficit hovering around 80,000. Add to this the need for one million new drivers over the next ten years to maintain current levels, and it is easy to see a few of the challenges facing the trucking industry. Recruitment and driver retention is compounded by the cost to train new drivers, insurance costs, and the fact that the average price of a Class 8 vehicle has doubled since 2019. Trucking companies need to find ways to hire and keep drivers while still being able to afford to put more vehicles on the road to haul shipments.
Access to Capital
Just as the cost of Class 8 vehicles has risen in just a few years, the barrier of access to adequate financing has increased in just a short period of time. Talk of inflation, rising interest rates, and collateral requirements make it very challenging for carriers to get loans. Right now, trucking companies and owner-operators need to have working capital on hand to weather the current outlook. If inflation continues and fuel prices remain unpredictable, working capital will be necessary to cover increased costs. If the outlook leans the other way, with capacity giving way to more business and the potential to grow, rolling out plans will be much easier with access to capital. That said, carriers are hesitant to take out loans right now because businesses are avoiding unnecessary debt.
Instead of jumping through hoops to secure debt-based loans, trucking companies and owner-operators are building up capital reserves by maximizing cash flow through freight bill factoring. As an alternative to traditional lending vehicles, freight bill factoring is a debt-free solution that converts outstanding receivables into cash. Most invoices have payment terms of 30, 60, or 90 days. There is no need for carriers to wait that long to access revenue for completed jobs. Single Point Capital turns those unpaid invoices into cash within 24 hours. Freight bill factoring allows trucking companies and owner-operators to maximize cash flow, build up capital rapidly, and maintain a financial cushion during unpredictable times, as well as stable times with opportunities for growth. By using freight bill factoring, trucking companies can cover overhead expenses, recruit new drivers, market their services to new clients, and more, to stay successful in both the macro and the micro pictures.
Maximize Your Cash Flow Today
If you are trying to manage unpaid invoices and increased expenses, reach out to the experts at Single Point Capital. We provide comprehensive freight bill factoring services to carriers of every size so they can maximize their cash flow and build up the working capital reserves they need to thrive and grow. Contact Single Point Capital today to get started.