What is Freight Bill Factoring?Posted by Factor Funding Co. on January 25, 2013
The term "freight bill factoring" may not be familiar to many transportation
company owners, but it's a term that could make the difference between keeping their business open and having to shut their doors. This funding arrangement offers a flexible way to access cash flow without having to take on additional debt, which is a huge benefit to many freight companies. Before you sign up for the funding, though, it's wise to ask: What's involved in freight bill factoring?
About Freight Bill Factoring
Freight bill factoring is a cash advance option that allows a company to sell its freight bills to a third-party company and get a cash payment for the value of the bill. After receiving the lump sum payment, businesses are free to use the cash for any business purpose they see fit such as repairs, payroll, or advertising, to name a few.
While transportation factoring can be extremely convenient, it also carries a few fees, including transaction fees. These costs, however, are rather small and insignificant compared to the costs of traditional bank loans or credit card interest rates.
How Does the Freight Bill Factoring Process Work?
Entrepreneurs who use freight bill factoring generally get to decide between two payment options: one that grants them a single lump sum payment and another that splits the payment into two installments. Both arrangements offer their own advantages. For example, if you were to opt for the full advance, you could expect to get a cash advance worth nearly 95 percent of your freight bill's value. If you need access to a large amount of cash right away, the single payment option would be your best bet.
On the other hand, if you chose to receive your money through the two installment arrangement, you would get most of your advance right away and then a second payment for the remainder after your customer pays off the bill. This option would be ideal if you need most of your cash now and if you know you'll need a bit more in a couple of months.
Any company owner knows that it's important to find out all he or she can about a potential source of financing before committing to it. Now that you know what's involved in freight bill factoring, you'll be in a better position to decide if this funding arrangement will help your company.