Trucking and Transportation freight bill factoring is a form of business finance that enables carriers and brokers to factor finance their slow-pay freight bills for immediate cash.
Owning and running transportation company, either as a carrier of freight broker can be financially rewarding but painfully challenging at the same time. One of the larger challenges business owners face is moving freight loads from shippers who slow-pay, taking up to 45 days or more to send a check for outstanding freight bills. This kind of delay creates cash flow gaps and makes it more challenging for your business to cover expenditures like, payroll, diesel fuel costs, repairs, new tires and weekly financial obligations.
Few transportation companies have the capital to meet the capital expenditures to operate your business competitively and still grow fast enough to be competitive and profitable at the same time.
You can close these cash flow gaps by using your outstanding accounts receivable invoices to get immediate money for your invoices. Factoring offers many of the same benefits as Quick pay without requiring your shippers to pay sooner. Shippers operate on razor thin margins just like trucking companies and don't like to alter their payment methods, even for the best and most loyal drivers in the industry. Using a factor finance companies money provides a stable financial platform that your business will use to keep shippers happy while growing your trucking business faster.
Common Methods used to Factor Finance Freight Bills: Typically factors use a two installment method, the advance and the rebate. The advance covers 90-95% of the freight bill and is funded within a few hours of your dropping your load and invoicing the client for payment. The rebate covers the remaining 5-10%, less the factors fees, once the shipper has paid the outstanding invoice in full.
Some carriers may qualify for single-installment factoring. In this case, the factor provides one 'single' advance, between 95 and 97% of the total invoice value. The percent not advanced in this scenario represents the factor finance companies fee for services. Single-installment financing structure has an advantage of delivering more immediate cash, but is often costing you more than the conventional transaction used in the two installment method.
You may be able to get a cash advance or even a fuel card or fuel card allowance before you even pick up the load. When shopping for the best deal at Factor bid, ask each of the competing factor finance companies if they provide any type of cash advance or fuel advance.
To factor your freight bills you need to have a legitimate operating business with the proper documentation, licenses and authorities. Factoring your invoices also depends a lot on the creditworthiness of your customers. You also must have freight bills that are outstanding and free from any type of liens or encumbrances.
Service fees range anywhere from 1.5% all the way up to 5% per 30 days and a calculated using a combination or variables, including your customers creditworthiness, sales volume and invoice amounts. A financing relationship can be established quickly, provided you engage with the factor finance company quickly and have all your company documentation in order.
It's recommended that you get a few competitive offers from factor finance companies before choosing the factor that is right for your business. Submit your invoice or fill out a factor bid trucking invoice application to get the best deal when factoring your open accounts receivable invoices for immediate cash.
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