When cash flow isn’t consistent; when you have big delays between delivery and payment that leave you hanging, when you’re poised to grow your business and need a bit more cash, or when you have sudden repairs that have to be paid for, freight factoring services can provide a way to get ready cash and keep things moving smoothly. Read on to learn more about how freight factoring services work.
What Is Factoring Financing All About?
All you’re doing when you take advantage of freight factoring services is assigning to a third party—freight brokering companies—your unpaid invoices for deliveries. They immediately pay you just a bit less than you would receive if you were paid by the customer directly. You get the money upon the delivery, and freight factoring services bill the customer.
What Happens if Customers Don’t Pay?
Typically, freight companies can choose whether they want bear the risk of nonpayment themselves or have the freight factoring companies assume the risk. If you as the transport service take on the risk, you’ll have to pay freight factoring services back if the customer defaults; but the broker will take a smaller percentage cut from your invoices. If you let freight factoring services assume the risk, their cut will be larger; but they will take all the loss should a customer default.
Do All My Invoices Have to Be Factored?
Most of the top factoring companies for freight brokers do not require you to factor all your invoices with them. In most cases, you can keep getting full payments directly from customers you know pay on time while factoring invoices from customers who wait to pay. That way you have consistent cash flow.
Will Freight Factoring Services Hound My Customers?
This is a common, but unfounded worry. Of course the broker company wants their money: that’s only natural. But they have no more reason to want to alienate your customers than you do. If your relationship with your customer is sound, deliveries are made on time, and payments come through, then everyone benefits: you, the customer, and the broker. Good freight factoring services want a win-win situation all around.
Why Not Just Get a Loan?
If you get a loan, you’re going to have to pay interest on it. You’re unlikely to save anything over brokering your invoices. Additionally, it’s hard to get loans without a great credit rating: but freight factoring services don’t care about your credit. They only care about the credit of your customers. You don’t have to worry so much about the number crunching and can concentrate on the freight transport aspect of your business.
There are plenty of good reasons to consider invoice factoring services, and these are just a few of them. If you’re poised to grow and just need a little more cash flow, if you’re struggling with late-paying customers and can’t get enough into the black to get ahead, or if you’re faced with unexpected repairs and bills, try freight factoring and get your cash flow moving.
