The Biggest Benefits of Truck Factoring
Like a water wheel requires a constant stream of water to keep turning, so too does a shipping or freight company need steady revenue to keep its fleet moving. However, money may not always be on hand even when you’re working constantly. The reason is that the invoices you give your customers aren’t often paid immediately. Most of the time, there is a delay, which can be as long as weeks or months, before you receive payment. This time waiting for your owed reimbursement may mean that you won’t have the funds to handle large shipment requests, depriving you of business.
One solution to this problem that is growing in popularity is truck factoring. Factoring is a financial transaction in which a business sells its unpaid accounts to a third party. In the case of shipping companies, this means that you can get funds for those invoices right away, allowing you to afford taking on new accounts.
This practice affords a number of benefits. Primary among these is speed of service. Rather than having to wait for an invoice to be paid, you will have the cash on hand immediately, giving your company the flexibility to accept new contracts and grow the business more quickly than if you had to wait for your customers to pay you off. It also means you can offer your customers payment plans tailored to their circumstances instead of your own, increasing the likelihood of future business deals with them. A
Another advantage of truck factoring is ease of implementation. It can be difficult and expensive to set up the infrastructure for collection. Some factoring companies offer back office support, taking on the billing activity for your company and saving you the time and effort of managing it yourself. It’s also easier to get approval for factoring than for traditional loans. While most standard lending institutions look at a company’s credit, which may not yet be established especially for a newer company, in factoring what matters is whether your customers have good credit. You also don’t need to surrender any of the company’s equity for factoring, the way you may possibly have to do in the case of a regular loan.
With truck factoring, you can get the funds your company needs in a timely fashion, letting you continue to take on business without any delays or interruptions, and can avoid the expenses of handling invoice collection. Taking advantage of these benefits will allow you to focus on the more important aspects of developing your shipping business.