freight factoring

Freight Factoring: Advantages & Disadvantages

If you’ve worked in the transportation industry for some time, you’ve probably experienced the concept of freight factoring. It’s far from an innovative financial solution. It’s been around for a long time, and it has remained in the market due to how it can improve cash flow for businesses and allow transportation companies to thrive.

Simply put, freight invoice factoring is the process by which owner-operators, large and small owners of fleets, sell invoices that are not paid to a factoring business for a cost. Factoring can spend the majority of the outstanding invoices within 24hrs to keep your business running. If your client (also called the debtor) makes payment on their invoices, the factoring firm will pay you the balance of the amount owed (called reserves) and minus a small fee.

What are the advantages of factoring in freight invoices?

  • It’s simple to qualify, and approval is swift.

The process of applying for factoring can take only the time of a few minutes. The approval process usually takes about a week or less. It’s much easier than securing banks’ loans that require much time, a thorough examination of your finances, and a mountain of documents.

  • You’ll be paid more quickly.

After you’ve been certified to factor, you can send invoices to be paid immediately. There’s no need to wait for anywhere between thirty to ninety days to have invoices be paid or stay in your mailer waiting for checks to arrive. Cash is directly deposited into your bank account for business or bank wire or loaded on a credit card.

  • Credit isn’t a lot of an influence.

Are you in the wrong financial position? If you’re looking to factor in your invoices, you’re not in trouble. Even if you’ve got a lower credit score or even bad credit, you may still be eligible to factor. The decision to approve you is primarily contingent on your clients’ creditworthiness and history of payment. This makes factoring a good option for and appealing to new trucking businesses.

  • There is no debt made.

Factoring isn’t considered a loan. You’re not taking out a loan. Instead, you’re borrowing cash to pay for loads you’ve already delivered and hauled. It’s your money, and you’re only receiving it quicker.

freight factoring

 

  • Your equity in your business won’t be lost or damaged.

Factoring is the only kind in financial transactions that doesn’t limit your company’s capital or stop you from getting funding from banks in the future to finance purchasing new vehicles, as an instance. This is, in essence, the money that has already been earned. Factoring in eliminates the doubt of the date you’ll get it.

  • Save on the most considerable expense – fuel.

Certain factoring companies offer fuel card programs that can give you substantial savings on your most significant expense – the cost of fuel. Factoring customers are often eligible for discount fuel cards that reduce the price when you go to the pump.

  • Factoring companies provide more than just fast cash.

Alongside fuel discount cards, well-established factoring firms can also provide advantages like fuel advances discounts on tires, access to load boards, and many more! These discounted discounts, which are pre-negotiated, and time-saving tools can help you to run your business more efficiently and won’t cost any money. The deals typically cover the expense of factoring.

What are the cons to invoice financing?

  • Well, indeed, nothing in business is ever completely free.

It’s no secret that it takes cash to generate money. Factoring invoices is expensive, but it’s only a small cost to receive your money in a matter of hours rather than days. Factoring takes away the uncertainty of when you’ll receive your money, allowing you to invest the money back into your business.

  • If your client doesn’t pay, you could be held accountable for a loss.

If your client fails to pay or fails to pay following the terms of the agreement, you could be held accountable for the cost of the invoice. However, if you’re in a deal that is non-recourse in place, the factor can take the brunt of the debtor being unable to pay insolvency-related reasons. This type of protection increases the rate because the factoring company accepts credit risk for the customers you factor in.

When you think about it, it’s easy to realize that the benefits of factoring outweigh the negatives. Pay your invoices quickly through factoring, typically in 24 hours. Utilize the funds to purchase fuel, cover costs and increase your expansion.

If factoring seems suitable for you, make sure you connect with a trusted partner such as capital. We’ve been in the transportation business for more than twenty years, which makes us regarded as experts in the area. By partnering with capital, you can keep your wheels moving instead of waiting for the time to be paid. You’ll receive:

    • A total discount on fuel with credit terms can help you save hundreds of dollars at the pump.
    • A broker network exclusive to brokers where all loads that pay high are factorable.
    • The top-of-the-line mobile app and online portal to let you manage your business from any location, at any time.
    • All your billing and collections will be handled so you can concentrate on delivering that next truck.
    • A dedicated account representative. You’re more than an account number.
    • There’s a lot more!

 

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