If you’re doing business in the trucking industry, you’ve probably heard about freight capital factoring. Freight factoring services have been a way for trucking companies and owner-operator companies to prevent long-term delays in invoices and payments.
But then, many business owners and drivers don’t understand what freight capital financing is or how it works.
Freight Capital Factoring Explained
Factoring financing always has the potential to benefit a lot of stakeholders financially in the trucking industry. This is through providing advance business capital to the company. This is true, especially for owner-operators, who usually spend time on other finances.
Freight capital factoring is also known as trucking factoring, as it takes the invoices for loads that allow people to get paid instead of waiting for months for the load to be paid out. This gives an influx to always keep the business moving in between payouts.
How Does Freight Capital Factoring Work?
In trucking factoring companies, getting paid is essential to keep the business successful. Factoring will allow the business to submit invoices to the factoring company and process it on the same day. It allows the business to get paid on the invoice amount sooner instead of waiting for weeks.
Freight invoice factoring will also give you the capital you need. And like any other business transaction, freight factoring works because there is always a benefit for the parties involved. The benefit is obtaining immediate payment instead of a long period of waiting.
For a freight factoring company, the benefit is the percentage they will charge for the invoice when they purchase it from the driver. It also translates to the profit when they collect it from the customer. On the other hand, the benefit for the customer is they get to deal with the company, which has the financial collateral to wait for the pay, rather than having a small freight company that will die to get paid.
The Freight Bill Factoring Option
If you haven’t heard about the freight bill factoring, it’s a third-party company that can purchase the pending invoices and gives cash advance. It gives the trucking service the immediate cash that it needs. It’s not a loan, so there is no repayment or interest. It could also help reduce workloads and back office.
Under the freight bill factoring option, businesses can:
1. Ensure that the payroll of your driver has been made on time. This will help retain loyal and top drivers for the business.
2. Ensure that all trucks are well-maintained on schedule for good fuel efficiency and safety.
3. Businesses can take on new contracts without worrying about the costs of having additional trucks on the road.
Freight Capital Factoring Benefits
There are plenty of good reasons why companies consider freight capital factoring. Aside from improving cash flow that will allow better business and financial stability, there are other benefits such as:
1. It improves your negotiating power
2. There will be an easier time to meet the payroll and other deadlines in the company
3. You will have lesser concern over expenses and fees that are related to missed payments
4. Greater bargaining power compared to others
5. The business will have the ability to tap into opportunities when available
6. Credit and financial risks are less likely in the eyes of lenders and brokers
7. Overall enhanced outlook and performance across the company network
8. Time would be so much easier in growing and implementing innovations and new technologies
Is Freight Factoring Right for the Company?
When it comes to deciding if businesses consider freight factoring, then these questions should be answered.
1. Do customers usually take time to pay?
2. Does a lack of cash flow negatively affect your business’s ability to grow?
3. Are slow-paying customers impact your ability to pay vendors on time?
4. Do you have issues with your client’s creditworthiness?
5. Are you spending enough time making calls for collections?
6. Do you know if the shipper or broker will pay you before taking the load?
If your answer is yes to these questions, there’s a big chance that freight factoring would help. Always remember that your time is valuable, and by taking advantage of what factoring could offer, you can always spend more time dealing with customers and let your business grow.