Some large unicorn startups are targeting freight matching for truckers as a great way to guarantee better utilization of trucks for smaller independent truckers, and offer the additional benefit of helping sustainability. Empty return trips are definitely a source of unnecessary air pollution.
Two big ones are Convoy in the US, and Zeus Labs in the UK. The concept is Uber-like and simple: match freight that has to move with trucks looking for a load. It’s easily handled with software. So far, so good.
Now these large, well-capitalized firms are using their financial power to offer factoring to their trucker clients. In effect, the truckers are selling their freight invoices to the large firms for ready cash of something like 80% of the value. The claim in the article is ‘up to 85%”. It’s up to the factors then to collect the full value of the invoice, possibly as much as 90 days later. This is due to the ‘slow pay’ practices of many shippers.
This factoring or loaning of money could be useful for a trucker, in order to get paid right after delivering the load. The question is whether the price is right. The factor can make a lot of money due to the reduced payment for the invoices. It clearly is a good business for the factor.
But as in small business everywhere, it’s not always the best policy to sell your invoices for early money. The discount may be too high to offer a decent profit on the trip. Truckers might be trapped by the idea of quick money into reducing their profits from each load by too much to sustain them. It’s a classic small business risk, that has to be examined closely.
I’m not sure truckers are all prepared to make this evaluation. But the offer of early payment can be attractive.
By Charlie Bartlett, Technology Editor 25/04/2022
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