Negosentro| How Freight Factoring Can Boost Your Business |If you run a transportation or trucking company, you know the stresses of waiting to get paid. Without access to funds when you need them running and growing your business becomes difficult. You need to be able to pay rent, pay your employees, and meet other essential business expenses. Varying payment terms and late-paying customers make ensuring stable cash flow unpredictable.
Fortunately, you don’t have to run your business with unstable cash flow. Freight factoring gives you the funds that you need to ensure your success.
What Is Freight Factoring?
Freight factoring is one of the most common solutions that trucking and transportation companies use to improve their cash flow. The process involves selling your trucking invoice to a factoring company. Once the company verifies your invoice (or invoices), it advances you up to 98% of the total value. You receive the rest (minus the factoring company’s fees) when your customer pays their invoice.
How Much Does Freight Factoring Cost?
With freight factoring, a company purchases your invoices for a discount. The company charges a factor fee, which is taken out of the advance you receive. Rates vary from company to company and are often determined based on several factors. Common factors include:
- Your monthly invoice volume.
- The average monthly invoice total.
- How long it takes for your customers to pay.
What Types of Freight Factoring Are There?
When it comes to freight factoring, you have two options: recourse and non-recourse. Recourse factoring is the more common option. The company provides you with the advance, but you’re responsible for covering unpaid invoices. Since you take the risk, factor rates are generally more competitive. With non-recourse factoring, the company assumes the risk. As such, the fees tend to be higher.
How Does Freight Factoring Benefit Your Business?
It’s Not a Loan
One of the greatest benefits of freight factoring is that it’s not a traditional loan; it’s an advance. You don’t have to worry about taking on additional debt or making another monthly payment. This can be a huge relief if you already have little cash flow or you have other debts to cover.
Instead, you sell your invoice at a discount to the factoring company for working capital now rather than waiting for your customers to make their payments.
Get Almost Instant Working Capital
The other problem with bank loans is that they can take time. There’s a lot of paperwork involved and you have to meet specific requirements to qualify. The entire process can take weeks.
As a trucking company, you don’t have the time to wait for a loan to fund. Waiting for your customers to pay is stressful enough. Instead of having to deal with more waiting, freight factoring provides you with almost instant working capital. There are less paperwork and fewer requirements. In many cases, you receive your funds in just one to two business days.
Grow Your Business
Waiting for payments can stunt your business growth. You may have to let opportunities pass you by simply because you don’t have the working capital to take advantage of them.
As state above, freight factoring provides you with almost instant access to cash. The funds you receive are yours to use as you see fit for your business. You can meet the necessary expenses of your business and have cash leftover. The remaining funds can be used to help you grow your business, whether that’s purchasing new vehicles, hiring more drivers, and more.
Focus on What’s Important
When the factoring company purchases your invoices, they assume responsibility for collecting customer payments. As such, you have one less thing to worry about. Instead of chasing payments, you can focus on what’s most important – your business.
Freight factoring can be an incredibly beneficial way to get your trucking or transportation company the funds it needs when it needs them. Be sure to do your homework, however, and compare your options before you sign an agreement.