All That Is Involved In Freight Factoring
Most of the times the freight companies find themselves with problems of poor flow of cash since most of their customers do not pay their bills in due 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. That is the reason why the company must have a cash capital to attend to such expenses. 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. Factoring, in other words, is a short-term loan that uses the invoice as the collateral. When the trucking company delivers goods to their clients they sell the invoice to the freight factoring company. 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 some factors that qualify a business for the freight factoring. 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.
When you deliver any products, ensure your services are complete and are accepted by your customer. The freight factoring companies helps companies that have insurance cover and a motor carrier authority. They then confirm the commercial credit of your customer and if they will pay the pill by a certain time. The another consideration they put before helping any company is to check if they have legal problems. When selecting a factoring company to consider their prices before you approach them.
Compare their application fees, advance rates, and their monthly minimums. Inquire how they deal with that bill that is not paid. Your research will prove to you that some of the companies accept the full responsibility of the unpaid bills. Others might as their clients to pay the unpaid invoices within an agreed period elsewhere others will exchange the invoice with the paid ones.