trucking factoring

Pros & Cons of Freight Factoring

June 12, 2020

Freight factoring has many advantages and benefits. From free credit checks and load board access to discounts and fuel advances, freight factoring saves time and money for trucking companies.

It doesn’t matter if you have a poor credit score or the how big is the size of your trucking company, factoring supports your programs in many ways.

There are flexible options that provide you to access the cash you need quickly. You can turn your freight bills into fast cash without forming new debt; freight factoring is not a loan.

There are many freight factoring advantages and disadvantages.

Some important pros and cons of freight factoring are as follows:

Also Read: 7 Quick Facts To Know About How Freight Factoring Works

PROS OF FREIGHT FACTORING

FAST MONEY – you need cash quickly when you have money problems. Many freight factoring companies fund your trucking businesses within 24 hours. Other traditional financing options like a loan from banks are never straightforward and take a lot of time to get that loan. Freight factoring companies provide you with cash immediately.

APPROVAL IS QUICK – freight factoring is easily and quickly approved. After you submit the initial application, it is possible to begin factoring as soon as 3-5 working days. Freight factoring companies only require a few supporting documents to complete their checks. You can begin factoring immediately once your account is set up. If you have a cash flow emergency, freight factoring can be used.

FUEL BENEFITS – factoring fuel cards and fuel advances offer extra help to trucking companies and businesses that have problems getting a loan. Fuel cards offer extra rebates from the truck stop companies, as well as discounts at many refuelling stations in Canada and the US. You can monitor spending and also add funds to your account when needed. Fuel advances are a cash advance that you receive when you pick up the load. You can cover fuel costs on the road as freight factoring companies will give you a small percentage of the freight bill. This provides you with extra convenience.

NO LONG TERM CONTRACTS – freight factoring is a brilliant financial option. It can be a temporary one, depending on your business’s needs and requirements. Freight factoring companies do not mislead you with long-term contract that you do not need. In fact, most factoring contracts are renewed on a semi-annual basis. This helps you to evaluate the benefits of freight factoring for your trucking company on a regular basis.

AVAILABILITY OF NON-RECOURSE FREIGHT FACTORING PROGRAMS – Non-recourse freight factoring is an option and risk-free funding for trucking companies that deal with late payments by customers after delivery. You get the total discounted freight bill amount before-hand and pay a factoring fee once, with non-recourse freight factoring.

NO DEBT – freight factoring is completely different from a business loan. With business loans, you take on some kind of debt. Freight factoring isn’t a loan, but you are simply borrowing money against your own assets. You will need to cover some factoring costs, but for many trucking companies this is better than having long-term liabilities.

CASH-FLOW IS BETTER – to overcome cash flow gaps, many freight brokers and trucking companies choose freight factoring. It is easier to grow and develop your business, once you have solved your cash flow problems. You can take more loads, expand your fleet, repair and maintain vehicles, hire more drivers, and invest in new opportunities, with cash on hand.

LOAD BOARD ACCESS AND FREE CREDIT CHECKSfreight factoring companies often provide load board access, free credit checks and various administrative services to your trucking business.

IMPROVED CREDIT – it is much easier to pay bills on time, once you have money in the bank. Your credit score will be higher, the more you pay your bills on time. It will be easier to qualify for other kinds of business financing and loans with an improved credit score.

FLEXIBILITY – many freight factoring companies allows you to factor the invoices that you want to factor, not less and not more. Sometimes there will be customers who pay you right after delivering a shipment, many factoring companies won’t need you to finance for those invoices. If you partner with a flexible lender, trucking companies can use freight factoring as frequently or infrequently as they would like.

FUNDING IS AVAILABLE REGARDLESS OF SIZE – it does not matter if you are a single owner and operator or running many trucks, freight factoring is there to help you. Freight factoring is beneficial for small and big trucking companies and businesses.

BACK-OFFICE SUPPORT – there are many services that can be useful to your trucking company. Depending on which freight factoring company you select, services like back-office support is available. Back-office services basically take care of your accounts and receivables. This helps trucking companies to provide quality service.

GROWTH AND DEVELOPMENT OF BUSINESS – when you are starting new, growth is important for any business. Freight factoring companies help you grow because you don’t need to wait for months to receive money. With freight factoring, you can use the money immediately to expand your business without waiting.

CONS OF FREIGHT FACTORING

HIGHER RATES – with a conventional line of credit, freight factoring rates are higher than interest rates. Rates are higher than a traditional bank loan.

BAD CLIENTS MAY COST – many freight factoring companies need you to purchase the invoices again if they have gone past their recourse. Many freight factoring companies keep a credit check before approving your clients for financing. You also need to have good quality of customers for you to be approved for a freight factoring funding.

REPUTATION OF THE FACTORING COMPANY – If you factor your invoices with the wrong freight factoring company, you can deal with a long waiting time for advances and also fall victim to wrong terms and conditions. You must carefully select the correct freight factoring company.

Freight factoring is an excellent way to handle slow payers and also deal with ongoing daily expenses. With freight factoring, you easily pay your creditors and take new loads. These are the factoring invoices pros and cons.

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