When you are the owner of a transportation company things are far from simple, the expenses of personnel, administration, gasoline, tolls, and other operating expenses are constant and do not wait while payment for services does not usually occur until 30 or 90 days after the goods are delivered sometimes even more which makes it very complicated to have the money needed to reinvest in your business and continue operating.
While numerous business opportunities exist, net revenues can be thin for little and moderate-sized shipping and transportation organizations because of substantial rivalry and the least bidder regularly making sure about the activity.
This is precisely why the industry is very common to make use of freight factoring. This form of financing that permits them to get paid in 24 to 48 hours and requires significantly less desk work than a business loan., all you have to do is take your invoices and refer to the freight factoring company some even allow you to do it by email or instant messaging which is much more flexible and reduces response times, The freight factoring company will review the invoices and the background of your client to see if they are worthy of credit and how viable it is that they pay their debt promptly, from the invoices they accept they will have to advance up to 95% of the total amount of the debts and once the day of fulfillment arrives they will contact your client and inform him/her how to make the payment of the invoice, they will discount their fee and deposit the excess amount. Factors typically charge 1% to 5% discount rate for their services.
Freight factoring depends on the reliability of your customers making it an ideal choice for freight organizations that are beginning. To expand freight factoring services, factoring organizations run a credit review on your customers. This advises you of your customers’ risk profile permitting you to settle on educated choices about keeping up a business relationship with them.
Thanks to freight factoring you will no longer have to wait weeks or even months for your client to pay his debt, you will be able to pay your bills and operating expenses, with the additional advantage that you will not need to have part of your employees to contact your client on the due date and collect the debt, or hire a service that does this for you. Factoring companies are in charge of these procedures. You only have to wait for the deposit of the remaining amount once your client settles the invoice.
The most significant qualifier for getting endorsed for freight factoring services is a client base with solid credit history, meaning with a record of taking care of tabs on schedule. The second most significant qualifier is that your invoices don’t have any liens or credits that utilize debt claims (A/R) as collateral.
Something that you may not know about freight factoring is that some factoring organizations offer extra back-office services, for example, credit checks, invoicing and collections services, web-based reporting, data stockpiling, fuel discounts, and advances, free trial to DAT load sheets, and more.