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:

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Can you answer Derek T’s question about Factoring?:

Moneybooker says, an unactivated moneybooker account has a 1500 Euro cash flow per 3 months and an activated account has a 15000 Euro cash flow per 3 months. I want to know clearly, what is the cash flow? Is it mean that I can’t receive any more money if I have received 1500 Euro to my unactivated moneybooker account per 3 months? Is the mean that I only could receive 15000 Euro at an activated moneybooker account?

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If you are dealing in industrial products or any other items, where you need to provide credit to most of your clients, then you would realize very soon that most of your money is stuck with your clients and you can lay your hands on that money only after they pay you on the due date. This can only be frustrating and can seriously hamper your cash flow thus leading to delayed payments to your suppliers, your staff members and can also put a roadblock on your road to expansion.

In business factoring, a factoring company will purchase your credit invoices that you have issued to some or all of your various clients. They will then wire the amount of your submitted invoices within 2 working days into your account after deducting their factoring fee, which is their service charge for handling your account. This fee could range from 1.5% to 5% of the invoice amount and would depend on the credit period extended to your client, the credibility of your client according to the factoring company and the total volume of business that you can give to your factoring company. As you start giving invoices of a higher value, your factoring company might lower the factoring fees, thus providing some relief in the future.

If your sales ledger shows that you are supplying products on a credit basis to a variety of clients that are financially strong and if your credit period too ranges from 30 to 60 days only, then your business could be an ideal candidate for the business factoring company. This will not only encourage the factoring company to tie-up with you, but you will also be eligible for a lower factoring fee that will enable you to hold on to most of your profit margins.

On the other hand, if you are working on wafer-thin profit margins and providing a high credit period to most of your clients, then it would be suicidal to engage a factoring company, since you would hardly be left with any profit margin to sustain your business in the long run. If a single credit client accounts for most of your sales figures, then that too would pose a serious problem in case the client refuses to pay the outstanding amount or does not want to do any business with you due to any reason. Thus, a wide range of steady credit clients with a reasonable credit limit could be ideal for the business factoring company to handle your account.

You too could use the incoming invoice amount to pay your staff salaries, your suppliers and even follow-up on your expansion plans. This could help to propel your business on a faster scale. If you have recently set up your business, then this financial tool could help you to stand on your feet quickly and confidently. If your business is suitable for factoring, then you could shortlist various factoring companies and check out their features and services, before deciding on the company that most suits your business format.

Thus, you should check your profit margins and also consider the variety of clients that you have on hand, along with the credit period that you have provided to them before making up your mind on whether to engage the services of a business factoring company. Conduct a proper research on various factoring companies before making up your mind, since their actions will affect your relations with your clients.



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

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Can you answer Derek T’s question about Factoring?:

Moneybooker says, an unactivated moneybooker account has a 1500 Euro cash flow per 3 months and an activated account has a 15000 Euro cash flow per 3 months. I want to know clearly, what is the cash flow? Is it mean that I can’t receive any more money if I have received 1500 Euro to my unactivated moneybooker account per 3 months? Is the mean that I only could receive 15000 Euro at an activated moneybooker account?

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