Freight bill factoring is a commonly used financial service that can help your transportation company get the working capital you need. For small, new and/or growing transportation companies there comes a time when they could use more working capital for things like making payroll, fuel, maintenance and taking on more or larger loads. It can be challenging for transportation companies to wait the 45, 60 or more days for customers to pay their invoices and the economic climate over the past few years has made it hard for them to get a bank line of credit. Fortunately, transportation companies have another option, freight bill factoring. Factoring can provide relief to your transportation business by giving you access to immediate working capital without your customer having to pay quicker than they normally would. Additionally, factoring allows transportation companies to consistently meet their payroll, pay for fuel and maintenance and take on more loads.
The Five Easy Steps to Freight Bill Factoring
Freight bill factoring can provide your transportation company with a continuous source of operating capital, here is how it works:
- You deliver your load as you normally would.
- You submit the paperwork to a factoring company.
- The freight bill factoring company can make up to 95% of the funds available to you within hours.
- The factoring company collects payment from your customer when the freight bill is due.
- The factoring company pays you the balance of your freight bill amount, less a fee.
Benefits of working with a factoring company
If you go to a bank for a loan they will consider whether your company is financially sound, factoring companies don’t look at the size of your business, how long you have been in business or your creditworthiness. Factoring companies look at the creditworthiness of your customers.
Additional benefits of freight bill factoring:
- As long as the transportation company’s customer pays the invoice no debt is incurred because you are “selling” the receivable.
- You no longer need to offer early payment discounts because you are getting payment right away from the factoring company.
- The factoring company will do due diligence on your customers making sure they are credit worthy giving you, often free, professional credit monitoring of your clients.
- The factoring company will often handle invoicing, processing, postage, collecting and more saving you time and money.
- You can concentrate on building your business and making money instead of wasting your time worrying about when you are going to get paid.
Freight factoring may not be the first option you thought of when thinking of a working capital solution for your transportation company but it can be the perfect solution to your cash flow challenges. There truly can be no downside. It can be just what you need to get the cash for your transportation company to make payroll, buy fuel, maintain your fleet and take on new and larger loads.