Advantages of Factoring: How Freight Factoring Can Benefit Your Company
If you run or own a trucking business, you already know that some of the biggest issues you face include managing fuel costs, finding and retaining responsible, qualified drivers, and maintaining consistent cash flow. One of the most effective ways of improving cash flow and saving time is to opt for freight factoring. There are a number of benefits of freight factoring for both brokers and carriers. Here’s a closer look at how it works — and how it can help your business and your bottom line.
Freight factoring is a type of business financing that lets you receive immediate advances on your invoices. In exchange for a fee, you get the money right away, which means you have working capital to run your business instead of having to wait to get paid.
Benefits of Factoring Freight Invoices
Whether you have a fleet of five trucks or 50, factoring puts money into your hands quickly. That favorably impacts your business in the following ways:
· Immediate cash flow: You won’t be waiting 30 days to get paid ever again! Many factors have same-day or next-day payment options. One of the significant benefits of factoring services is that you have the funds to pay for fuel, salaries and other expenses without having to put them on a credit card or otherwise finance them.
· Ability to haul more loads: An increased cash flow means you can pay out your expenses and take on more loads than you otherwise could.
· Quick payments: Factoring is much faster compared to when brokers pay. Some pay every 30 days while others pay every 45 days. Most factors pay you within the week, if not on the same or next day. That means you get your funds fast.
· Time savings: Factoring eliminates the need for you (or your employees) to spend time invoicing, following up on invoices or checking on payments. Factors take care of the invoicing, collections and disputes. This frees you up to focus on other areas of your business, which can result in greater productivity and profitability.
· Protection from bad debts: One of the sometimes overlooked benefits of invoice factoring is that it protects you from bad debts. A bad debt occurs when a creditor owes you money but is unlikely to pay. Factoring, especially non-recourse factoring, protects you if a broker goes out of business or can’t pay on a load.
· Less stress and fewer headaches: Another of the many benefits of factoring may be harder to quantify but is no less important. With factoring, you know you’ll be paid — and quickly. That takes a lot of “what-ifs” out of your day-to-day life, which means less stress for even the busiest owner or manager.