In today’s tough economic climate, running into cash flow problems is inevitable and almost every company is struggling to find a solution to use their investments more wisely, more efficiently and more carefully. Freight companies, in particular, are more prone to cash strains than any other businesses and they’re not to be run by fleet managers with a weak heart. If you’re in the trucking business and you’re trying to boost your cash flow, the chances are you’ve heard something about freight factoring and now you want to find out how can it actually benefit your business.
You know that operating close to the red line is dangerous for your business and only one unexpected cost can result in huge financial losses. But we know that a truck factoring company can help you avoid them and improve your cash flow significantly. Freight factoring is basically a cash funding arrangement in advance that allows you to sell off your customer invoices and receive the payment for the value. This way, you avoid waiting for 30, 60 or 90 days for your customer to pay you. When you factor your freight bill, you give the truck factoring company the responsibility to collect the payment from the customer for you.
Although these companies charge a fee for their services, it’s still more cost-efficient solution than any other. Compared to applying for a loan, for example, freight factoring is far easier, far faster, and far more flexible. To make it as easier as possible for you to understand how can freight factoring benefit your business, here are 6 great reasons you should hire a truck factoring company.
Fast and Convenient Funding
The most enjoyable benefit of hiring a freight factoring company is faster and more convenient funding than (probably) what you’re used to. Instead of waiting up to 90 days for your customer to pay you, a freight factoring company will make sure you get your payment in only 24 hours. Although they charge you with some fee, most companies would give you up to 95% of the total value of your payment. The days of hiring an accountant to sort all these documentations are over, as these companies collect invoices, take their fee and give you the remaining value in cash usually in less than 24 hours. Meanwhile, they take care of all the other responsibilities.
Once you submit an application for truck factoring services, it takes usually from 3 to 5 business days for them to make a factoring decision. In most cases, the application process takes a whole week, because there are several supporting documents a factoring company must check. And when they approve your application, you can get your payment in a day. The quick approval process makes truck factoring incredibly useful in cash flow emergencies.
Work with Customers with High Credit Rating
As truck factoring companies are required to work with your clients, they choose your clients carefully and ensure you’ll work with good, trustworthy clients. They review the credit quality of both your existing and new customers, so they can help you determine which ones have good payment records. Since cash flow is the single most important matter of your business, working with customers that have good payment history is a big advantage.
In effort to provide additional help to trucking companies (especially small), most factoring companies provide fuel advances and fuel cards which can help you get loads from your origin and deliver them to the required destinations. A fuel advance is money given to you as soon as you pick up a load, while fuel cards are convenient way to achieve big money savings by getting fuel discounts on thousands of refueling stations in the U.S. Many factoring companies offer both options and they only charge a small percentage of the total value of your purchases.
No Hidden Fees
Unlike banks which are known for including all sorts of hidden fees in loans, truck factoring companies are straightforward and feature no hidden fees or setup fees in the factoring agreement. Also, they offer a free factoring scheme and show all their fees upfront, so you shouldn’t be afraid that you’ll be victim of fraud. If there is a fee you’re not satisfied with, you can see it before you sign the agreement and suggest a modification. After you sign it, rest assured you will encounter no unexpected fees.
Factoring services are also flexible, which means they will support your aspirations for further business growth. As your revenues grow, the financing line with these services grows too. Unlike conventional business loans, truck factoring is not limited to a specific amount and allows your financial line to increase as your customers meet the factoring criteria. This sort of flexibility is commonly overlooked, while it is actually a future-proof solution for saving money.