Businesses are often forced to exhibit a sort of superhuman flexibility in order to effectively navigate through the fluctuations of a market that often has its own ebbs and flows. The trucking industry has its own set of factors that can cause an abundance of available trucks and equipment with little or no places to go or products to haul. When fuel is relatively cheap, trucking companies cross fingers and hope the demand outweighs supply, thus equaling higher load rates. No trucking company wants its fleet to be inactive.
Though business may be stagnant, causing difficult decisions to be made, there are still ways in which you can circumnavigate the difficult times and come out on top.
Consider the Benefits of Accounts Receivable Financing (Factoring)
There is nothing like an economic downturn or a market slowdown that hampers your ability to make your cash flow work for you. However, it is better to be prepared for a crisis than to react to one.
The time to research and seek external possibilities for funding is before the need for immediate funding becomes crucial. Whether you need to purchase trucks and equipment or you need to loosen the reins of your cash flow rather than overspending on immediate fuel costs, factoring can be an option that can help you weather the storm until light begins peaking through the economic clouds again, as it always does – and will.
What is Freight Factoring? How Would it Benefit Your Trucking Business?
As you have been made keenly aware by your experiences, it can be difficult for a trucking company to obtain mainstream financing from banking institutions without both excellent credit and sufficient collateral. In an economic downturn, both items tend to fall to their unhealthiest levels.
Freight factoring allows your trucking company to benefit from a rapid injection of cash flow for work completed. A financial factoring company (the factor) purchases outstanding accounts receivable (invoices) and then funds your company for the invoices purchased. The factor will then collect payment from the client at the agreed-upon time.
The payment to your company is the value of the contract minus factoring fees. You will usually receive that payment within 24-48 hours if you have already set up a factoring agreement with a financial factoring company.
With many companies, you can qualify quickly with little to no application fees or financial records. You can submit your invoices from a home office or from the location of the pick-up or drop-off. There are is no maximum or minimum amount of invoices that you have to factor. However, it is to your benefit to factor as many as you can, because the fees decrease as the volume increases.
How Will Freight Factoring Benefit Your Trucking Business?
- You will be able to pay your suppliers quickly, thus building their trust and gaining their confidence.
- Your drivers and staff will appreciate your ability to meet payroll promptly because you are no longer waiting for slow, long-paying clients.
- You will be in a position to grow as you will have the cash flow to haul more loads and enter into more contractual work.
- Everything will be more fluid because the cash flow stream is more instant and more dependable.
How Can We Save on Fuel Through Factoring?
Fuel is usually the number one cost for a small to mid-sized independent trucking company. Many factoring companies have fuel factoring programs that usually involve discount cards. Ask your factoring representative what they can do. You will likely be ecstatic with the results.
Would My Company Qualify (Even During An Economic Downturn)?
Factoring companies cater toward small and medium start-ups, but they also work with many large fleets. They support both local and long-haul truckers and companies, and they also value their relationships with freight brokers. Factoring was created to help companies who need help, not multinational corporations with hundreds of millions of dollars in cash-on-hand. They want to help you stay afloat so you can grow. It is a partnership based upon a relationship which will benefit both parties long-term.
When you choose factoring, you are choosing a relationship that is built and structured for the benefit of your company. Ask questions and be wise. Most factoring companies are there for you, the business owner. Your comfort is best for both the future of your business and the factor.
A slow trucking market can cause fear. With a good factoring partner, however, you will be able to wade through the most violent economic storms and continue to grow your dreams.