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. They always wait for their clients to come on their own will to pay their money. There are other expenses that the freight companies have to settle like paying the wages, fuel and maintenance cost. Expenses such as the fuel cost cannot wait for other expenses within the freight company. Those urgent expenses are the reason why the company must have a ready capital. 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 issues of poor cash flows leads to depending on the freight factor. Factoring, in other words, is a short-term loan that uses the invoice as the collateral. The transporting or the truck company delivers good to their customers then take the invoice to the freight company for payment. The freight company then pays trucking or the shipping company in installments. They only pay the shipping company the full invoice after the client has settled 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 various factors in your business that should determine if your business is qualified to get help from the freight factoring company. The factors include the business cash flow, terms of payment of each account, the amount of money owed and how loyal your customers are in paying the bills. After putting all the factors into consideration then you can know if your company is qualified for the freight factoring.
Make sure you complete your services by ensuring your products are delivered and accepted by the 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. They only assist those companies that do not have legal problems such as tax issues. When selecting a factoring company to consider their prices before you approach them.
You may want to compare their application fees, their monthly minimums and their advance rates with other factoring companies. Do your research and find out how they deal with the unpaid invoices. Some of the freight factor companies would be responsible for all the risks. 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.