Companies that transport loads as the core of their business continuously rely on the practice of transportation factoring. Selling their outstanding invoices to invoice funding companies for less than their actual amount is common with freight companies. While there are many terms used for this type of financing, the important thing is that you can get immediate cash in exchange for your accounts receivables in the form of unpaid invoices.
Most invoices have terms that can take up to 30, 60, or even 90 days. But with small business factoring services, you can receive money from transportation factoring companies by selling these unpaid invoices to them instead of waiting a long time for the invoices to get paid by your clients. This way, your invoices can get paid sooner rather than later.
How Transportation Factoring Works
Apart from small businesses, companies of all sizes can also benefit from having the best invoice factoring financing services. Still, invoice funding is exceptional at meeting the needs of companies in the transportation industry who face unique challenges concerning their invoice payments.
Through invoice factoring services, you have an excellent solution to increase your cash flow that can, in turn, help keep your company operating without a hitch.
Many factors can contribute to keeping your transport vehicles and trucks off the road. Some examples include increasing fuel prices, emergency vehicle repairs, and slow-paying clients.
So if you have insufficient cash flow, your business can take a huge blow. If you can’t get your transport vehicles on the road, how can your company make any money?
Companies in the transportation industry, especially those focusing on freight, make money by transporting goods to their clients. However, instead of paying with cash after the goods have been delivered, customers choose to get billed. And the worst thing is that most customers wait until the invoices are due before paying them off.
However, if you work with transportation factoring companies, you can sell these unpaid invoices to them. In return, they will give you immediate cash of up to 90 percent of the amount owed.
After the funding company receives payment from your customers, it will, in turn, pay you the remaining balance less their service fees.
Benefits of Freight Factoring
Factoring offers numerous advantages in the fast-paced world of trucking:
1. Provides Funding Within 24 Hours
It’s crucial to establish a good relationship with an invoice funding company. This way, you will be regarded as a reputable business, and it can help you get funding as soon as you deliver a load.
When you receive the funds quickly, your freight company can devote more of your time and effort to other areas of your business that can help yield higher profits. This goes the same for other trucking firm operators and owners.
Startups and small businesses can have more working capital and revenue stream if they use invoice funding in the best possible way. Even big companies can benefit from having a positive cash flow derived from factoring services.
2. Aids Freight Companies in Avoiding Debt
Once the factoring company releases the funds, they deposit the cash directly into your business bank account. The amount transferred is readily available, and you can use it immediately to pay for your company’s daily operational expenses. For example, you can use it to pull additional loads, refuel your trucks, cover the salaries of your drivers, and pay for emergency vehicle repairs.
3. Eliminates Fixed Limits
Lines of credits that you get from traditional banks have set limits. If you want to increase the limit, you will have to request it formally, and it can take time to get approved.
On the other hand, factoring is more dynamic. As long as you work with trustworthy clients with excellent credit, you can help grow your company quickly.
Use Factoring To Get the Most Out of Your Freight Business
Operating a freight company is already stressful enough without having to worry about issues involving cash flow. Therefore, it’s an excellent idea to work with freight invoice factoring companies that can provide you with immediate cash to cover your operating overhead, meet employees’ needs, and keep your trucks transporting loads. Having quick and easy access to cash alleviates a lot of the stress that comes with managing and running a freight business.