Everything About The Freight Factoring
Freight companies have issues with the cash flow because most of their customers do not pay their debts in time. The freight companies have to wait for their customers to come by and pay the money they own them. The freight companies still have other expenses to sort such as the maintenance cost of their vehicles, fuel cost, and the wages. Unlike the cost of wages which can wait, the fuel cost must be settled on time. The company must have a ready capital to settle all the urgent expenses that might come up. Some of the trucking and shipping customers interrupt their cash flow because they have pending bills that have to be paid by their clients.
The problem of poor cash flow leads them to rely on the freight factor. The factoring can be termed as a short-term lending and the invoices acting as the collateral. The transporting or the truck company delivers good to their customers then take the invoice to the freight company for payment. The freight company then pays trucking or the shipping company in installments. They pay the full invoice amount when the company completes paying the bill.
Freight companies benefit from the deal by taking some small fee for their services. The factoring charges vary depending on factors like the worth of the credit of the customer, credit, the amount to be factored and the average time the invoices are paid. There are various factors in your business that should determine if your business is qualified to get help from the freight factoring company. You must consider the business cash flow, amount of money to be paid, the terms of payment and the loyalty of your customers. You will only know if your company is eligible for the freight factoring after you put all the factors into consideration.
Ensure you deliver your services as per the specification of your customer and ensure they accept the services. A company is eligible for the factoring if they are insured and have a motor carrier. The factoring company must ensure that your clients have great commercial credit to affirm that they will settle the bills in a specified period after receiving the invoice. They only assist those companies that do not have legal problems such as tax issues. When selecting a factoring company to consider their prices before you approach them.
It is crucial to compare their application fees, their monthly minimums and their advance rate with other similar companies It is important if you find out what they do with the unpaid bills. You will find out that some take up the risks upon themselves. There are those that require their clients pay the invoice within a given period while others will ask them to exchange the paid invoices and with the unpaid ones.