All That Is Involved In Freight Factoring
Many are the times when the freight companies find themselves with huge pending bills due to the unpaid money by their customers. 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. The company must have a ready capital to settle all the urgent expenses that might come up. Some of the trucking and shipping organizations have interrupted cash flows as they wait for customers to pay bills for their services.
The problem of poor cash flow leads them to rely on the freight factor. Factoring is a short-term loan that has the invoice as a collateral. When the trucking company delivers goods to their clients they sell the invoice to the freight factoring company. The freight company after buying the invoices they pay 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 some factors that qualify a business for the freight factoring. Some of the factors include the business cash flow, the amount of money owed to you in the receivable accounts, the terms of payments of each account and how reliable and loyal your customers are in paying bills. After putting all the factors into consideration then you can know if your company is qualified for the freight factoring.
When you deliver any products, ensure your services are complete and are accepted by your customer. Your transportation company can be qualified if you have proper insurance and have a motor carrier authority. The factoring company first makes sure that your customers have an excellent commercial credit and can pay the bill at the time they stipulate. Freight factoring companies do not work with companies that have legal issues like the tax problems. Before you get to choose a freight factoring company to work with you ought to check their pricing factor.
It is crucial to compare their application fees, their monthly minimums and their advance rate with other similar companies It is important if you find out what they do with the unpaid bills. 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.