If your trucking business caters to clients on a credit basis, then you might feel the need for regular finance to run your business smoothly. A freight factoring company could help you by providing ready finance against your credit invoices.

Freight factoring companies are financing companies that buy your credit invoices from you. These companies then proceed to wire the invoice amount to your bank account within 24 to 48 hours. The Freight factoring companies retain a ‘factoring fee’ from the invoice amount as their service fees. This fee could range from 1.5% to 5% depending on the arrangement that you have with your freight factoring company. This money can be extremely useful for you to pay your fuel and servicing bills, your employees’ salaries and can even fund your expansion plans. Your freight factoring company could also arrange to collect the payment from your clients on the due date. However, it is essential to locate the right freight factoring company for your trucking business, since your reputation too could suffer due to the misdeeds of the factoring company.

You can compile a list of probable freight factoring companies by looking up the Internet or checking various advertisements placed in related to trade magazines. If any of your friends can refer a factoring company, then it could be better. Check and crosscheck the factoring company, before tying up with them. The freight factoring company should have enough experience in working with trucking companies with similar needs as yours. This will eliminate any trial-and-error processes during the setting-up phase. Since, your clients will also need to be informed of your tie-up with the factoring company, you will need to ensure that they are comfortable with the new arrangement. The freight factoring company’s staff should be polite and tactful, while handling your clients. They should not end up irritating your clients in their zeal to recover any outstanding payments.

The ideal freight factoring company should also have enough funds to wire the amount into your account within the decided time limit. They should not delay any payments or provide lame excuses for the delay on a regular basis. They should also not insist on a long-term contract, since this might prevent you from parting ways, in case you are not comfortable with the arrangement. The factoring fees should be reasonable, but this rate should not be the only criteria, while making your choice.

The factoring company should also have the latest data on hand, so that there is no confusion regarding collection of payments. The factoring company should be easily accessible over the phone, fax and email and should communicate promptly in case of any problem. There should be one or two answerable people in your factoring company that are personally involved in handling your account. The company should also have the resources to grow along with your business. The factoring company should also not withhold any additional sum from your invoice, until your client pays up. They should pay you the entire invoice amount minus the factoring fee immediately. Inquire with some of their regular clients to get an accurate feedback about the factoring company’s quality of service.

You should thus conduct a proper research into the credentials of all the prospective freight factoring companies, before deciding on the ideal freight factoring company that suits your business. The right freight factoring company can hence put an end to your cash flow problems and enable you to haul away smoothly.



Thanks to Kris Koonar for contributing this article to our Factoring blog:

Accounts Receivable Factoring

If you run your own trucking business, then you might be painfully aware of the fact that a lot of cash is required on a daily basis to pay fuel bills, drivers’ salaries, routine maintenance and repair bills and your other employees’ salaries. Since most of your clients could be paying you after a period of 30 days, meeting these routine expenses could pose a serious challenge to the growth and survival of your trucking company.

In such a case, you might wish for money in your hand, whenever you need to pay for your routine and even unexpected expenses, such as sudden repair bills or tire replacement bills. You could apply for a bank loan, in order to take care of such expenses. But, if you have just entered the trucking business, then banks would impose restrictions in the form of collateral or guarantors, in order to secure themselves against a bad loan. You might also need to provide your audited financial statements for the previous 3 years showing your profit figures, which would not be possible, if you were new to this line. You would have to repay the loan along with interest in the form of regular monthly installments for a fixed time, failing which the bank could take possession of the collateral offered by you, while availing the loan.

This unique need has created a financial tool known as freight factoring. Freight factoring companies offer you immediate cash against your credit invoices after deducting a factoring fee. They purchase your credit invoice and wire you the invoice amount after deducting a factoring fee of around 1.5% to 5%. This fee will be based upon the business that you generate for your factoring company, the number of days that you have extended to your credit clients and the credit rating in the eyes of your factoring company.

The factoring company might also retain another 5% to 10% of the invoice amount as security, although this would depend on the arrangement that you have with your factoring company. This means that instead of a fixed amount, you can get varied amounts at regular intervals depending on the amount of invoices that you have factored with the company. Thus, as your business grows, you might submit larger invoices to the factoring company, which in turn will provide fatter funds for your business.

Freight factoring will first and foremost help your trucking company by providing instant money without going through the hassles of providing collateral or audited documents. This money will immediately improve your cash flow and enable you to clear your daily bills such as fuel bills, drivers’ and other employees’ salaries, truck servicing and other repair bills, etc. Freight factoring will also enable you to take on new hauls, which previously would have seemed impossible due to shortage of funds. Freight factoring companies can also take over your receivables by collecting your payments from your clients on the due date, albeit at an additional fee. This too will enable you to divert your energy towards increasing sales rather than running after erring clients.

Thus, freight factoring can walk hand-in-hand with your trucking business and the money that is provided by such companies can help you to meet your expenses, take on new clients and larger hauls and even plan an expansion. Flexibility is the key in freight factoring and once you avail the services of the right factoring company, your trucking business might easily reach from point ‘A’ to point ‘B’ without any hiccups.



Thanks to Kris Koonar for contributing this article to our Factoring blog:

Business Capital Financing