How Freight Factoring Works
Many are the times when the freight companies find themselves with huge pending bills due to the unpaid money by their customers. They always wait for their clients to come on their own will to pay their money. 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. The company must have a ready capital to settle all the urgent expenses that might come up. 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 is a short-term loan that has the invoice as a collateral. After the trucking or the transporting companies deliver their services to their customers they sell the invoice to the freight company. After they sell the invoice to the freight company they are paid 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. Their prices are not the same for all clients but depends on the worth of the credit, the time of payment and the money to be factored. There are various factors in your business that should determine if your business is qualified to get help from the freight factoring company. 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. When you put everything into consideration then you can decide whether you need the freight companies to help you.
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.
It is crucial to compare their application fees, their monthly minimums and their advance rate with other similar companies Inquire how they deal with that bill that is not paid. Some of the freight factor companies would be responsible for all the risks. There are those that require their clients pay the invoice within a given period while others will ask them to exchange the paid invoices and with the unpaid ones.