Most trucking companies have to pay in cash for their day-to-day expenses such as fuel bills and also have unexpected expenses such as truck repair bills and fixed expenses such as salaries, regular servicing and tire bills. Since they get their payments from their customers after 30 to 60 days, freight factoring for trucking is a good way for them to increase their cash flow and also to expand the business.
If you own a small to medium trucking company, then the above conditions apply to you too. You might not be able to run to a bank for a loan every time you need funds. You might also have taken a loan already to finance your trucks. Hence, taking another loan to run them might not be possible. In this case freight factoring companies would be able to help you out. In freight factoring, the factoring company will “buy” your credit invoices, which you have issued to your customers and pay you your invoice value in 2 installments.
The 1st installment will be wired to your account within a day or two, and would be 60 to 90 percent of your invoice value. The 2nd installment will be given to you when your customers pay the factoring company on the due date of the invoice. This installment will be minus the factoring company’s charges. These charges will depend on your customer credit rating with the freight factoring company, the number of days of credit given by you to your customer and the total volume of business that you give to the factoring company.
Freight factoring companies can also take care of collection of your freight bills from your customers. This frees your concentration from the credit section of your business, enabling you to concentrate more on getting new customers and handling old ones. The can also provide you with regular receivables and payment received statements enabling you to streamline your business.
You might have to enter into a long-term contract with your freight factoring company, so choose a company that gives you and your customer prompt and polite service. There are many companies who have started advertising on the Internet so you can check them out. You can also contact a factoring broker who, after accessing your business needs, can help you to tie up with the right freight factoring company. You might not have to pay him any brokerage, since it is normally paid by the factoring company.
So, when freight-factoring companies pay you almost your entire freight invoice value within 2 days, this not only improves your cash flow to enable you to pay your fuel bills and other expenses, but also takes care of your collection end and helps you to increase your business. You can now take on more freight deliveries and earn more in the long run. It also removes worries about delays in payments from your customers. Hence, a freight factoring company is more than just a way of finance. It is an extension of your business.
So, if you have a trucking company, it makes sense to use the services of a freight factoring company to help you grow in your business