Trucking companies need to get paid. To do so, they use factoring companies to get their invoices paid. This takes out the waiting game. The best factoring companies for trucking companies can be found online with a quick Google search and reading the reviews. It’s important to get invoices paid so trucking companies can stay afloat and pay their truck drivers.
Trucking companies offer different types of truck driving jobs. In some cases, they will supply the truck, but it’s more economical if you have a truck and will drive. Some of the most sought after is the heavy load truck driver. This position is not for the novice but for well-qualified, experienced truck drivers. Freight and trucking is big business. Truckers are like the veins of our country. Without them, our supermarket shelves and gas stations would be empty.
Truck drivers are also urged to keep up with the maintenance of their trucks. It’s important to get truck transmission service, as well as oil and fluid changes as often as recommended, which is every three months or three thousand miles.
If you own a trucking company, payments are not instant after delivery in most cases, and so you’re forced to wait for weeks, even months, for an invoice to mature and receive payment. Unpaid freight invoices are bad for your business and can significantly interrupt your cash flow, limiting your business growth. Perhaps you’ve heard of factoring services and wonder whether transportation factoring companies can help you manage your cash-flows.
Transportation factoring companies — also known as trucking or freight factoring companies — offer an advance business capital on your unpaid invoices, and collects payment on the receivables from the company’s customers. Additionally, some big factoring companies can absorb the cost of outstanding invoices for a price.
As the owner of a trucking company, finding the best factoring financing company for your trucking business is imperative, particularly if you’re looking to develop a long-term relationship. Essentially, when you find the right trucking factoring company, you’ll want to keep them close to enjoy their services for long. However, these companies vary in the services and the main point of difference is the price. So you need to do compare several options to find a company with the best conversion rates.
Here are a few tips for choosing the right transport factoring company for your trucking business.
Understand How Freight and Trucking Factoring Work
Transportation factoring companies act as financial institutions for business looking to convert unpaid freight bills to quick cash within the shortest time possible. So how do they work? A factoring company buys business’s accounts receivables at a discount and then pursues the customer for their invoice payment. The advance cash is especially important for small business to effectively manage their cash flow, allowing you to pay employees on time and be able to service your truck.
Types of Trucking Factoring Companies: Recourse vs.Non-Recourse
The two main types of factoring companies are recourse and non-recourse. Recourse factoring is a type of invoice funding guaranteeing that your customer will honor the invoice, and should the customer ultimately fails to pay the factoring company, you become liable for the payment.
Non-recourse factoring, on the other hand, protects you from unpaid freight bills from your customers and therefore, you’re not liable for non-payment, instead, the company absorbs all the risks. This seems like the best option compared to recourse factoring which is risky to your business when dealing with customers with unverified commercial credit history. Small businesses are encouraged to choose non-recourse factoring, despite cost more than recourse factoring.
Transportation Factoring Companies: The Merits and Demerits
Benefits of factoring companies include:
- Offer advanced business capital
- Maintain your cash flow
- Manage your business expenses
- Fast funding option
- Flexible loan option than a traditional loan
- Simple and easier to secure than a traditional loan
- Advance fuel cards
- Free customer credit checks
Some of the disadvantages of transportation factoring companies include:
- Recourse factoring makes you liable should the customer doesn’t pay the invoice
- Clients like to deal with the trucking company directly, so if you subscribe to a factoring arrangement, then your customer might find out and perhaps won’t appreciate that
- Some trucking factoring companies use vigorous measures to collect outstanding payments on invoices, your customer may not appreciate thus negatively impacting on your relationship
- Minimum factoring volumes and varying contract terms may not be favorable to your business
- It’s a costly option, even though you get advance capital on your unpaid invoice, the discount rate the factoring company deducts is significant
- If you enter contract factoring arrangements, meaning that you’ve agreed to have all your invoices to be factored by the same company, then you miss out on the best rates from other factoring companies as you’re limited to the contract
Whether you are a small trucking operator or deal with high-volume deliveries, freight factoring offers you the best option to maintain steady cash flow and grow your business. However, your choice of factoring company depends on the size and needs of your business.
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