Limited access to working capital is one of the biggest frustrations for freight truckers. Most start-ups struggle to keep afloat as they wait for 30, 60, or even 90 days for payments to arrive. With 79% of business owners admitting to late payments, your freight company may suffer a severe cash crunch.
What Is A Factoring Company?
Invoice factoring is a financing option that will enable you to receive cash advances on your account receivables, streamlining your cash-flow. A Factoring company for freight truckers offers debt-free funding by purchasing your invoices at a discount. You then receive 70-90% of the value of your invoice upfront, with the remaining balance remitted when your clients honor the payments.
Choosing the Right Factoring Company for Freighters
Selecting freight factoring services should be done carefully. Do your homework. The terms and conditions offered vary from one provider to another. Here are five tips to guide you in choosing the right partner for your financing options.
1. Rates and Fee Structure
Trucking factoring companies have different models for their factoring rate structure. The financing may either be a flat-rate or a variable model. Flat-rate advances don’t accrue any fees or penalties even when the invoice is overdue but attract higher charges. The variable structure is more complex, with factoring companies discounting a small percentage of the invoice for every month the bill remains unpaid.
2. Recourse vs. Non-Recourse
Are you willing to take on the risk if the clients fail to honor their payments? Recourse factoring financing establishes that you, as the business owner, cover the costs if the client defaults on payment. You will have to buy back the invoice from the factor. In non-recourse factoring, you are not liable if the customer fails to pay the outstanding invoices. However, fees charged are higher, with deeper scrutiny of your client’s credit score and payment history.
The right freight company for factoring company freight offers different service models for their clients. Do you wish to factor all your account receivables through the vendor? Perhaps you may want to choose which invoices to submit? Spot factoring allows you to factor a single invoice at a time, allowing small businesses to grow as they search for larger orders. Whole ledger factoring allows freight factoring companies to collect all invoices for a more discounted fee.
While searching for a factoring company for factoring company freight, find one with experience of working with freight truckers. A factoring company for freighters tailors their services to meet the custom requirements for the transport industry. Freight factoring services offer additional benefits to truckers, with some offering fuel advances and fueling cards.
5. Customer Service
The factoring service will be working closely with your customers; thus, you need a company with reputable customer service. Professional factors offer dedicated financing advisors for their clients that help facilitate inquires before, during, and after signing the invoice factoring agreement. It would be best to work with a factoring company for freight brokers that will help you navigate unexpected challenges that may arise.
Invoice factoring provides a debt-free, cash advance option that may help you meet your financial obligations and expand your business. Finding the right factoring company for factoring company freight is the first step to your enterprise success. If you are looking for reliable and efficient invoice factoring services, visit our website today.