Trucking and freight companies regularly have cash flow issues. Since the expenses associated with running a trucking company are so costly many company owners find themselves in a bind when they have to wait 30 to 60 days to receive payment from their customers. Freight factoring is one way that business owners can free up cash for their immediate needs. Finding out how freight factoring can help your trucking company may be a lifesaver to your business when you need to receive payment right away.
What is Freight Factoring?
Freight factoring is a service that allows trucking companies to receive money based on the amount of their outstanding invoices immediately. Factoring companies are willing to advance most of an outstanding invoice to the business owner and then collect on the actual invoice to be repaid. Generally, businesses can receive their money within a day or two after establishing a factoring agreement.
Qualifying for Freight Factoring
Unlike a traditional bank loan, freight factoring has few qualifications and no credit check. Companies that apply for factoring must be doing business with reliable customers who have a record of paying on time and the companies themselves must be free of any type of tax issues. If your trucking company meets these standards, you'll probably qualify for a factoring agreement. Even if you recently started your business you will probably qualify for factoring since most factoring companies do not use time in business as a condition for extending an agreement.
Benefits of Freight Factoring
There are several ways freight factoring can help your trucking company. Initially, the service helps you to get fast access to cash right away rather than waiting a month or two to receive your payments. This is particularly useful if you have impending expenses such as payroll, repairs or improvements that you need to cover immediately. Another benefit of freight factoring is that the service saves you the trouble of chasing down your customers for payment. The factoring company will assume the responsibility of collecting on the invoices for you. This gives you plenty of time to focus on the day-to-day operation of your business.
If you're the owner of a trucking company setting up an invoice factoring agreement may provide you with the instant cash flow you need and save you the trouble of collecting on your invoices.
