How Trucking Companies Use Freight Factoring
Trucking companies often experience financial difficulties when they have to wait 30 to 90 days after delivery for load payments. A viable method of strengthening your cash flow and stabilizing your budget is freight factoring. Which allows you to get paid immediately after deliveries. Here is what you need to know about this important funding option.
Freight Factoring Basics
Freight factoring involves selling your accounts receivables to a factoring company for the cash you need to keep your business running. When utilizing this funding method, you receive an advance of the value of an invoice. Minus the fee that the factor charges for its services.
The Process of Freight Factoring
After you complete the delivery of a load to a qualifying customer, you submit all relevant paperwork to the factoring company. Usually online or via a mobile app. The factor buys the invoice and immediately pays you. Then your customer sends payment directly to the factoring company and not to you.
Freight Factoring Considerations
When you apply for freight factoring, the financing company will want to know the volume of your monthly invoices, the size of your customer base, and how long your clients generally take to pay. You will need to agree with the factor on what percentage of the invoice will be advanced upfront. Also, whether an amount will be held in reserve until your clients pay their bills. Be sure you are aware of the fees the factor charges.
Advantages of Freight Factoring
Trucking companies mainly choose factoring as a funding method to keep their cash flow strong. Numerous freight companies have difficulty obtaining loans from traditional banks. Even if they qualify, the application process is tedious and lengthy. Freight factoring offers an alternative financing option with an easy application process that allows you to obtain the funds you need quickly. Factoring companies also take over the billing and collection process. Which saves you the time and effort of handling this paperwork yourself or the extra expense of hiring more personnel to take care of it for you.
For more advice on freight factoring, contact Gipson Commercial Solutions.