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 factoring companies are patient with the customers until they come and off their bills. Freight companies have many expenses like the fuel cost, maintenance cost, and paying the wages. There are some of the expenses that cannot wait for long without being attended to like the fuel cost. Those urgent expenses are the reason why the company must have a ready capital. Some of the trucking and shipping organizations have interrupted cash flows as they wait for customers to pay bills for their services.
The issues of poor cash flows leads to depending on the freight factor. Factoring is a short-term loan that has the invoice as a collateral. The transporting or the truck company delivers good to their customers then take the invoice to the freight company for payment. After they sell the invoice to the freight company they are paid in installments. The full amount is paid when the freight company receives the whole invoice amount from the client.
The factory company pay themselves by deducting some amount of money from the invoice. Factors such as the credit, the time of payment and the worth of the credit are some of the determining factors of factoring charges. 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.
Make sure you complete your services by ensuring your products are delivered and accepted by the customer. Your transportation company can be qualified if you have proper insurance and have a motor carrier authority. They then confirm the commercial credit of your customer and if they will pay the pill by a certain time. Freight factoring companies do not work with companies that have legal issues like the tax problems. Check their range before you think of working with any factoring company.
You may want to compare their application fees, their monthly minimums and their advance rates with other factoring companies. Inquire how they deal with that bill that is not paid. You will find out that some take up the risks upon themselves. Others require their clients to pay them is the invoice is unpaid within the specified time while some will ask you to replace the unpaid invoices of the non-paying customers with the ones from the paying customers.