A strong transportation infrastructure can ensure a strong foundation for all the businesses involved. And with over 15 million freight trucks of all shapes and sizes in our country’s transportation network, it’s essential that all the steps are carried out in an efficient manner.
With each load that vehicles carry, they are preceded and followed by a ton of paperwork. The whole process can be a daunting experience for many, especially the small owner-operators. They need all the help they can get, and with a plethora of logistics resources at their disposal, it’s fair to say that the job becomes easier.
Freight bill factoring
But there is one powerful tool that can help transportation companies get the most out of their business. Freight bill factoring is certainly an asset to the industry, and its importance needs to be recognized in the industry so that all the players in this field can reap the advantages. Getting a competitive edge in the market isn’t always an easy task, but with the help of freight bill factoring, it’s easier for transportation companies to make their business run smoothly and streamline their operations.
To ensure a strong financial model for their business, nowadays it’s common for transportation companies to use this tool. Freight bill factoring can help the company deal with their daily expenses by selling their unpaid invoices. They get upfront cash and don’t worry about collecting invoices. With a simple paperwork process, the factoring company usually just takes 2-3 days to approve the initial application. Once the application is approved, it takes less than 24 hours for transportation companies to get the funds that they factor.
Easier than a loan
In the business of transportation, customer payments are one of the biggest issues that transportation companies face. It’s difficult to request quick payments from customers all the time, and that’s why companies need a tool on their hands that can help resolve this issue.
Factoring and loans are two separate things. Many companies make the mistake of considering them as the same, and that’s where they go wrong. The biggest difference between the two is that freight bill factoring doesn’t create debt and it’s much easier to get.
Transportation companies that have just entered the market and are small-scale find it difficult to get bank credit in their line of work. The problem remains for some large-scale operations, too. Even if they get approved for a loan, the long, drawn-out process doesn’t do much for businesses that are in need of some urgent help.
In order to take advantage of the opportunity, transportation companies have two options. For large-scale businesses, it’s easier to go for an advance-reserve. Typically the advance is 90-95% of its freight bill. Once the transportation business delivers the load and issues an invoice to the customer, it receives the 90 to 95% advance of the freight bill. The remaining 5 to 10% reserve is held by the factoring company until the customer pays their bill in full. Once the customer pays, the factoring company will forward the remaining reserve (less fees) to the transportation business.
The second option that is attractive to small-scale transportation companies is the full-advance option. As the name signifies, the factoring company buys the freight bill and provides the entire advance upon billing the customer. This option ensures the transportation business gets more money upfront and hence gets the operating capital to fund its operations. This option is typically more expensive than the advance-reserve option, but the trucking company gets more money upfront.
Other benefits of factoring
There are several advantages that transportation businesses and other players in the industry get with the help of freight bill factoring. The biggest one is the available funds and the cash-on-hand advantage that this solution can provide. With no restrictions on funds, it’s easier to take on more loads and hence, increase profits in turn.
Businesses that are considering freight bill factoring or are already involved with factoring companies get a great chance to improve the quality of their customer pool. Freight factoring companies evaluate the creditworthiness of their clients’ customers. Transportation businesses want to know they’ll get paid. By engaging in freight bill factoring, freight brokers determine who they include in their customer pool. They tend to avoid customers that might be problematic. It becomes important for them to focus on customers who will pay.
As long as a transportation business work for good-paying customers and deliver competent service, there’s no reason they can’t be successful. Freight bill factoring is a great way to build success. If you’re involved in the transportation industry, it’s time to contact good factoring companies in your area to help advance your business to new heights of success.