When you run a trucking business, you should expect to run into several challenges. Some of those challenges include managing recurring costs and expenses, seeking and retaining responsible drivers, and maintaining a consistent cash flow.
Freight factoring is an efficient way for truck companies to improve their cash flow while saving on time. There are vast benefits of factoring that help your company grow. Here’s a closer look at how factoring works and how it will help your truck company.
Related Post:Â Truck Owners: How to Find the Best Factoring Company
Factoring, specifically freight factoring, is a mode of business financing. Through factoring, truck companies get immediate advances on their invoices. You then receive the money on your invoice, giving you the working capital to manage and run your business.
It’s a service that saves you from having to wait for a client to fulfill payment for a load that has been delivered.
Why Factor With ezfreightfactoring.com?
Truck owners continuously think of how they would grow their business if they could access the money held by their customer invoices. As much as the idea of a financial tool that appreciates cash flow is very compelling, taking a loan from a bank to finance growth is an expense that carries a bit of risk.
Factoring with ezfreightfactoring.com enables you to enjoy cash advances on all your factored loads. You also receive fuel cards that are usable in nearly all the major truck stops in Canada and throughout the United States.
You’ll get to enjoy same day funding, free fuel card enrollment, month to month contracts with no minimum volumes. Registration is easy and you won’t have to pay an application fee, plus you get to decide which of your customers to factor.
How Does Truck Factoring Work and What Are Its Benefits?
Truck factoring is a sale of the uncollected invoices in your company at a discounted price by companies referred to as freight or factoring businesses. The money awarded isn’t a loan but rather a cash advance.
The factoring company gives your company a percentage of your invoiced values upfront. The rate could go up to 98% of the invoices’ value depending on the factoring company.
After the transaction, the factoring company will then take up the burden of collecting all the unpaid invoices. Once the payment on all invoices is collected, the freight company will pay the remaining amount to you.
Read on to understand the various benefits truck factoring can offer to your business.
Also Read:Â 5 Tips for Starting a Small Business as a Student
Benefits of Truck Factoring
Truck Factoring Protects You From Bad Debts
One of the most significant benefits of factoring to truck companies is protection from bad debts. Bad debts take place when creditors owe you money that they are highly unlikely to pay.
Factoring, particularly non-recourse factoring, protects your company from losses if the broker runs out of business or is just unable to pay for the load. Factoring companies absorb the losses from such invoices while still paying out. If your truck company took a non-recourse agreement, you won’t ever have to worry about bad debts.
Additionally, factoring companies will screen your potential customer’s credit for you. This way, you’re able to ascertain that the customers will have the funds to pay you. It’s an upfront way of saving you from starting projects with clients that cannot pay you.
Factoring Saves Your Truck Factory Time
Invoicing, following up with the invoices, collecting, and checking on the payments, all take considerable resources in time, money, and effort since they require employees to carry out the work.
Hiring a factoring company will allow them to take those responsibilities off of your table. They will handle the collections and any possible disputes with your clients on your behalf. It’s usually a service that’s catered for by the factoring fee. By freeing your company from that hassle, it allows you to focus on other significant areas of your business which in the long run result in greater profitability and productivity.
Checking consumer credit status and following up on invoices while collecting the outstanding invoices amongst other duties is labor-intensive and consumes so much valuable business time. Many invoicing tasks also require attention during working hours, meaning you often have to hire additional employees to manage them.
Also Read:Â How To Protect Yourself When Running A Home Business
Factoring Gives Your Company Immediate Cash Flow
Waiting 60 or 90 days for payment isn’t the most convenient payment method when running a trucking business. For this reason, some freight factoring companies have next-day or even same-day payment options.
A very significant benefit of getting factoring services is that your company gets funds to cater to equipment, salaries, repairs, fuel, and other finances. Immediate cash flow prevents you from dipping into your savings, personal pockets, or seeking another alternative, yet inconvenient and expensive funding resource for your business.
The best part about factoring is that it provides you with the money you need to fund your business. Unlike conventional loans, you’ll be getting an advance on money that you’ve worked for and with no debt or interest attached to it.
Having cash in hand is essential not just in trucking businesses, but all businesses. You might find there’s a sudden spike in fuel prices or emergency repairs needed for your trucks. You’ll also need some easily accessible money for a sudden boom in business that requires you to hire additional drivers quickly.
You Get To Factor on Your Terms
When you partner with a factoring company, you have the option of choosing which of your invoices you would like to factor. There’s no restriction on the companies you can factor, including government agencies.
Owing to the factoring company’s monthly volume requirements, you can choose which of your customers you want to factor along with when you need to factor the loads.
Factoring Enables You To Haul More Loads
An increase in cash flow enables your business to pay out any expenses that would limit you from taking up additional loads that you would have otherwise not struggled to take.
Increased cash flow grants you an opportunity to invest in new trucks, fuel them as well as your existing fleet, and even add extra drivers to pick up the additional loads. Your trucking business will thus grow faster than it would have if you chose to wait for your clients to pay up.
Growth opportunities rarely come along, meaning you need to stay ready to take up chances. One struggle for new or growing companies is accepting new large orders from new and existing customers since they lack the financial stability to take up the loads.
Factoring Offers Quick Payments
Fast and easy payments are what defines the concept of factoring. While some brokers pay in 30 to 60 days and others as much as 90 days, with factoring, you’ll get a payout the same day or within the next 24 to 48 hours.
Once you’ve already set up an account with a factoring company, you’ll have your funds in quick time and not have to worry about the inconveniences that come with late or delayed payments. ‘
That mere assurance that you’ll get your money in a matter of hours takes away any ‘what ifs’ concerns from your daily business life which should serve as a relief to the busiest of managers or owners.
Factoring Does Not Impose Debt on Your Business
Though you’re receiving money beforehand that the factoring company will collect, the transaction cannot be likened to a loan. The factoring company purchases your invoice then takes out the nominal factoring fee and gives you the cash requested as stipulated by the contract you agreed to.
Remember, this is money that is yours and that you have worked for. The factoring company will make its money back from your client once they fulfill their invoice. As such, there aren’t any debts to keep track of or future payments to make and neither is there any interest charged on your cash advance.
However, there might be hidden fees charged so this is something you will want to confirm with your factoring provider of choice.
Also Read:Â The Latest Urban Transport Vehicle Technology
Grow Your Company with Truck Factoring
One of the trucking business’ most challenging parts is securing funds to grow and secure more contracts with their clients. Factoring is the best solution to sourcing financing so you do not have to turn away high-paying opportunities.
Freight factoring eases a lot of concerns for truck business owners since it provides immediate cash flow which will allow your business to grow in otherwise hard-to-achieve ways. It’s very effective, especially for new truck companies that do not stand a high chance of loan approval because they don’t have good credit yet or are still fresh in the business.
Thanks to factoring, you’ll be able to manage your driver’s payroll and fund any surprise repairs or equipment needed. You will also be able to forget about following up on client payments and instead focus on hauling more loads while the tracking company handles the collection.
As the owner of a fleet of trucks, even if it doesn’t seem plausible that you might need factoring in the near future, it’s best to prepare in advance. You’re never too sure of what’s down the road ahead.
