You’ve probably heard about freight factoring companies, especially if you are in the trucking business. However, while it has become known for trucking companies and owner-operators to prevent delays in payment for invoices, many drivers in trucking factoring companies don’t understand what is freight factorings services or how it works.
In this blog, you will understand more about freight factoring and how it could potentially benefit small business owners, especially in the trucking industry.
Understanding Freight Factoring Services
There are about 12 million trucks, locomotives, rail cars, and vessels that move goods over the network of transportation. So the freight factoring services would take the invoices for the loads you allow and run to get paid on them instead of waiting up to 90 days to load and be paid out.
It also allows an influx to a business’ working capital to keep the business moving, even between invoices and payouts. Factoring service for trucking businesses now becomes vital, as invoices are not paid right away.
Just so you know, it would take about 40 days or even more for the transportation industry to process payouts. This processing time can make or even break the budget of the company for the freight. As a result, many companies have had to turn anywhere else just to make ends meet every time.
Though, in the past, small businesses only rely on bank loans, or even credit cards, just to stay afloat. This is true, especially when there are more payouts than pay-ins on their balance sheet. This can be hard to juggle, and the company may end up spending thousands in interest incurred over time.
How Does Freight Factoring Services Help Companies?
With Freight Factoring Services, the owner or the company would be able to have business as usual. However, instead of waiting on the payment, they would just sell or transfer the invoice of the job to the third company or the transportation factoring companies.
They are going to “buy” the invoice for about less than the total owed for the job. However, they could make up for it by paying right away. For some freight businesses, this kind of setup would seem like a lifesaver for their monthly or weekly budget. It allows them to cover expenses without even incurring other debts.