Life as we know it would not exist without truckers and trucking companies. Unfortunately, trucking companies can face unpredictable cash flows and lengthy waits for payment. Freight factoring can help you address payment gaps and give you a competitive edge in the market, so your company grows stronger and you can manage it with less stress. Let’s look at how it works.
1) Freight Factoring Shortens Time Between Loads and Payment
The premise behind freight factoring is simple: you do the work, then sell your unpaid invoice to a factoring company. It’s possible to have as more than 90% of the value of the invoice within 24 hours, eliminating lengthy waits for payment from your clients. The factoring company handles billing and collecting payment from your client, and then provides you with the remainder of your balance, minus a nominal fee for the service. Because you’re no longer waiting on payments, you can put that money to work for your company immediately on what matters most to you: payroll, more equipment or covering the expenses of taking on more work.
2) You Get Cash Up Front Without Going into Debt
Many people confuse factoring and financing. These are two different things. Again, factoring is a debt-free solution. You’re selling your invoices. Financing involves taking out a loan and paying it back with interest and fees. Debt has a way of snowballing and leaving business owners trapped in an endless cycle of fees, which is detrimental to any business, but can cripple a small or midsize business entirely. Factoring isn’t a loan – it’s a purchase of your outstanding invoice. You get your money, not debt.
3) You Eliminate Unnecessary Expenses
How much time do you currently spend invoicing your clients and chasing the money? It can be an involved process. Freight factoring frees you from it, eliminating many of the expenses associated with invoicing and collecting. Again, this is money that stays in your company, which you can use in whatever way serve your needs best.
4) You Can Offer Longer Terms to Your Customers
Companies often have to wait 30 days to receive payment, but some are forced to wait more than 60 or 90. When we’re speaking of the transportation industry, sometimes clients need even longer to pay. Most companies cannot afford to wait this long. However, when you’re leveraging factoring, you can accept extended payment terms without actually waiting for payment. If a broker’s terms are 30 days, you can confidently accept the load knowing your factoring company will pay you within one to two business days, and then later collect from your client. The factoring company will likely perform a credit check to ensure the broker is likely to pay.
5) You Can Make Informed Decisions About Extending Credit
When you give your clients time to pay, rather than expecting cash on delivery, you’re extending credit to them. That may be fine under most circumstances, especially if you have a good working relationship with that client. However, it can also be problematic when the client can’t afford to pay his bill. Factoring companies look into the creditworthiness of your clients before agreeing to factor an invoice, and then establish an amount they’re willing to factor based on what the client can reasonably afford. You’ll know this number, so when the client approaches you and asks you to perform more work, you can make an educated decision as to whether they’ll be able to pay for it. In short, it allows you to accept work with confidence.
6) Unexpected Expenses Won’t Throw You Off
Having more cash on hand makes it easier to manage unexpected expenses: truck maintenance, etc.
7) You May Qualify for Discounts and Free Tools
At Interstate Capital, we know how hard you work, so we offer value-added services that enable you to run your transportation company more efficiently. One example of this is our free fuel discount card. We also operate the largest free load board, giving you access to more jobs with just a few clicks. Plus, each of our clients is paired with a dedicated account manager who can also put you in touch with other professionals who can help with everything from licensing to filing your taxes.
Get a Free Freight Factoring Rate Quote
Freight factoring can give your company a major competitive advantage and help you run a more profitable and efficient business. It’s also surprisingly affordable. To find out what rates you qualify for, get an instant factoring rate quote online.