The Benefits of Factoring for a Trucking Company
TAny trucker knows cash flow can be a problem. Customers may delay their payments causing your financial belt to tighten. Or long invoice times can leave you cash strapped at the worst time. Whether your trucking company is one single rig or a whole fleet of them scattered around the company, transportation factoring can relieve some of those cash flow problems and help your business grow.
Transportation factoring is also known as accounts receivable factoring, which has been around since the days of the first Manifest Destiny explorers. A factor or lender purchases the freight company’s invoices in exchange for a fee. The trucking company benefits by receiving the cash upfront without having to wait for the customer to pay. The factor takes on that risk and once the payment is made, the agreement is complete.
By relying on the customer’s creditworthiness rather than the business owners, factoring may be easier to work with than a traditional bank loan. The loan may be a good idea for those trucking owners with less than stellar credit scores. Banks also take longer to process and require more paperwork with lower approval ratings. Transportation factoring uses your invoices as collateral making them a lower risk so achieve easier and faster approval.
Factoring allows you to decide on the number of invoices to submit. You can choose all or only the ones you know are prompt customers to increase your chances of success. Most companies handle the customer billing taking their fee off the amount paid. Some factors allow you to continue to bill your customer as usual. You then handle sending the factoring company the amount owed plus their fee. Look into the available options to choose the right one for your business.
If customer payment delays keep you up at night, you might benefit from using this type of short-term loan solution for your trucking company. Handling that next load and focusing on the logistics of your company should be your top priority. How else can your business thrive and grow? Factoring can provide a solution to your cash flow woes.
Owning a rig comes with many ups and downs but being cash-strapped doesn’t always have to be the case. Transportation factoring offers freight companies an opportunity to have the funds they need when they need them. Let the factor take the risk on long invoice windows and late payments by customers. Get more cash faster without adding to your debt so you can increase your profits by making more hauls.