As any big-rig driver knows all too well, there are plenty of expenses associated with driving down the highway. From maintenance costs and insurance to fuel costs and much more, even the most successful trucking company incurs numerous expenses along the way that can eat into potential profits. Unfortunately, one of the biggest problems faced by trucking companies large and small is receiving timely payments on invoices from freight that has been delivered to a customer. While many invoices give customers up to 90 days to make payment, it is very common for customers to wait far longer than that before paying for their deliveries. In the meantime, the trucking company and its drivers are still incurring expenses. To help with this problem, many trucking companies rely on freight factoring. If you are considering this option, here is why your company needs factoring now.
No More Gaps in Cash Flow
For many companies, one of the biggest problems they face is a cash flow gap from month to month. When this happens, it not only becomes difficult to pay for fuel and maintenance costs, but also other bills that may be due to creditors. However, by using freight factoring, cash flow gaps can be eliminated. Since this will allow a company to receive as much as 95 percent of the total invoice within 24 hours, it will be much easier to pay expenses and other bills.
Quick Access to Cash
As any business owner knows, applying for a loan at a bank is not something that resolves itself quickly. Instead, the process can usually take several weeks, and in many cases the bank will decide to deny the loan request due to poor credit or other factors. However, freight factoring will eliminate this problem altogether. Not only will selling invoices to a freight factoring company lead to cash within 24 hours, but it will also not be dependent upon your company’s credit rating. Instead, the freight factoring company will only be interested in the credit of the company that has been invoiced. If it determines the customer’s credit rating is sufficient, your trucking company will have cash in its hand in only a matter of hours.
Help Your Company Grow
For many companies that are smaller and wanting to expand, having to wait on payments from customers can be frustrating. Along with not being able to pay bills and other expenses, waiting on these payments also forces a company to put off plans for expansion, purchases of new equipment, and other key aspects of growing a business. However, if freight factoring is adopted as a way to ensure regular payments of invoices, it is often possible to pursue expansion plans and other aspects of business development when needed.
Since fuel is usually the biggest expense of a trucking company, using a freight factoring company can allow a trucking company to become part of a fuel card program. With this program, the factoring company will enroll the trucking company in its fuel card program, and will automatically deposit the money from the invoices directly onto the fuel cards. By doing so, drivers will always have immediate access to money for fuel, giving them one less thing to worry about while on the road.
No Incurring of Debt
Unlike taking on a traditional loan, freight factoring allows a company to not get in debt while waiting to receive payments from customers. This can be particularly important for smaller trucking companies, since taking on debt can often hinder the ability to do many other tasks, and can also sometimes lead to poor credit scores if bills start to be paid late or not at all.
For many trucking companies, one of the biggest advantages of freight factoring is that as the business grows, they are given access to more money from the factoring company. In many cases, the factoring company will pay more and more for invoices the longer they do business with the trucking company, resulting in more working capital. Once this is the case, it becomes much easier for a trucking company to make long-range plans regarding equipment purchases, hiring new drivers, expanding facilities, and much more.