Your trucking business might suffer from unwanted financial jerks and knocks, if in spite of running it successfully, you might not have ready cash to meet your daily expenses. Trucks require fuel to run, the drivers require weekly wages to drive and so too other employees and there are various other expenses that need to be met on a daily or weekly basis for this business to continue with your reputation and finances intact.

If you are plagued with the above problems, then you need to seriously consider teaming up with an experienced freight factoring company. These are financing companies that will buy off your pending credit invoices and will not only pay you the invoice amount minus their factoring fee, but in case if you so desire, will also take over your receivables off your hands.

The factoring company will deduct a factoring fee ranging from 1.5% to 5% from your invoice amount as their fees. They might also retain another percentage of your invoice ranging from 5% to 10% as security, in case there is any problem in recovering the invoice amount from your clients due to any reason. As compared to a bank loan that might just dump a certain amount of money in your account that would have to be paid back with interest within the specified time frame, a freight factoring company can provide you with a multitude of services with no towropes attached.

The best service that a factoring company can give you is to wire the invoice amount into your bank account within a day or two. This will inject your business with instant cash that can be used to fill fuel, pay your drivers and take care of other business related expenses. Another service that your factoring company can provide is to takeover your receivables section.

While this will require you to inform your clients that the factoring company will henceforth collect the payments on your behalf, it will also free your mind and staff from the tension associated with running after your clients for your money. This invaluable service will enable you to divert your attention and energy towards increasing your sales. The factoring company will also provide you with updated lists of your receivables, so that you too can keep track of your clients. Thus, your freight factoring company will walk hand-in-hand with your business and in fact will become an extension of your business by providing finance at regular intervals as well as arranging to collect the dues from your clients.

In fact, a freight factoring company will be much more proactive than a traditional bank and will customize its services to suit your business. It will arrange to wire the invoice amount into your account as soon as they receive the invoice from you as well as arrange to collect the dues from your clients on the due date, which a bank will never be able to do. The factoring company will also remind your clients to pay up, in case they do not pay by the due date, thus freeing you from monitoring your clients on a regular basis.

The right freight factoring company can therefore provide you with ready money as well as arrange to collect the outstanding dues. Therefore, you can get instant cash to run your business, even as you provide credit to your clients. You can thus get the best of both worlds, just by paying a small factoring fee to your freight factoring company.



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

Cash Flow Funding

Factoring is a smart way to bring in cash flow to your businesses. It provides ready capital to meet the ongoing daily operational expenses. The procedure is relatively simple and quick hence, this type of funding is gaining popularity with business houses. However, while working out the solution to augment the cash crunch in your business through factoring, take into account some important pitfalls that you can avoid. There are certain downsides to factoring, which hamper your growth instead of developing your business. Therefore, read on to get a clear picture of the pros and cons of factoring.

The time factor while entering into a contract for factoring is very important. Factoring companies may need a long period of commitment from you to sell receivables to them. For instance, a factoring firm may compel you to sell the invoices to their firm for a period of six months. In such a case you are tied down to selling your receivables even if your cash need is short-termed. Also, it ties you to a particular firm, which may deter you from enlisting the services of other factoring firms that may offer some good schemes.

Factoring offers respite to the revenue requirements of the firm. But beware of the fact that businesses can get hooked on to the habit of factoring. With Factoring solutions the business gets converted to COD business in a very short time, so the ongoing liquidity can get addictive, even if its not needed by the company. Sometimes, this tendency to continuously factor the invoices or receivables can make the business house pay dearly. If, the business house has opted for recourse factoring and in case the receivable does not materialize or is not paid up, then the business house becomes liable to pay back the amount with interest to the factoring firm. Hence, even if the fee for factoring may be less, the total interest cost could be expensive.

While selecting a factoring firm, make sure that the factoring firm is pleasant to deal with, as it will affect your relationship with your customers. The factoring firm after buying the receivables assumes the responsibility of collection from your customers. They may require financial details of your customers, which could be met with resistance. Your customers may also not like to make payments to third parties; they may view it as a financial weakness from your side. This may have a negative impact on further orders from them.

The factoring firm may interfere with your business practices, which they feel may minimize risks in composition of your invoices, though this may not suit your requirements. In case, you want to apply for a bank loan, then the bank may also want to use your receivables as collateral. But if all your receivables have been factored, the bank will not be readily convinced to give you a business loan. This may even result in the bank disapproving your loan application altogether, as you no longer own the most liquid asset of your business.

Hence, it is recommended you clarify these issues before you opt for business factoring. Be aware of these pitfalls and watch out carefully for the fine prints on the factoring agreements and only then go in for this type of funding for your business.



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

Factoring Tips

Factoring is a simple and inexpensive tool which helps sort out the cash flow pressure caused due to non-paying or slow paying customers. It is a way to get immediate cash when your trucking company is in need. By giving your invoices and accounts receivables to the factoring companies you may even get up to 96% of the face amount in cash. The credit risk lies upon the truck factoring company who takes up the risk, depending upon the creditworthiness of the amount receivable.

Selecting a truck factoring company

Choosing the appropriate company which suits the needs of the organization is highly relevant to ensure smooth cash flow. The lowest cost is not the only criteria for selecting a factoring company. If they have a good track record and are specialists in the truck factoring business, they should be given consideration.

Check the track record of the truck factoring company

Check if the factoring company has a proven track record in the industry for the level of service you require. If the company has been in business for long, it would have seen many business cycles which can form a basis for proof of its strength in handling tough situations. You can have these things clarified from the company representatives or get references about them and the financial conditions handled. Most important, ask for references from the company’s existent clients as well.

If the company is a specialist in the truck factoring industry

You need to check if the company specializes in the truck factoring business. This is because in such a case, the truck factoring company is aware of the freight brokers and the shippers. They will have hands-on experience in dealing with such companies. This helps in saving your money that is put on the credit reports.

Does the company have a collection department?

You may check out if the truck factoring company has a collection department. Most of the companies may not have a collection department and the job is mostly done by the accounts representative. Having a separate department for collection is of help as the same person may not be able to do the two jobs perfectly.

Does the company have a credit department?

Similar to a collection department, a credit department that looks into credit related matters should also be useful. A credit team who takes care of the entire credit needs of the customer is better than one which does not have a credit department. The companies may expose you to inappropriate levels of risk by not having a credit department.

Is the company size suited for your trucking business?

There are companies of various sizes, large and small, giving the truck factoring services. A company which is small enough to provide personalized services as well big enough to provide financial stability may be ideal for you. A company which is very small may not be enough to satisfy your financial needs effectively. They may even prove to be insufficient to purchase all the receivables.

Is the company using technology?

A truck factoring company which is updated with the latest technological advancements is useful. A company which allows credit quotes via Internet can help in saving a lot of your time and money. With proper details about the company as well as timely online credit decisions you can speed up and maintain all your cash needs.

Such factors may be given consideration when you are selecting a factoring company. With such details, you will be able to get the maximum possible benefit of the factoring to help you with your cash needs.



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

Structured Settlement Funding