Transportation Company Factoring Explained

When starting a transportation company, a strong cash flow is just as important as your truck. You might have heard of freight factoring, one of the most ideal financing options for trucking companies. Unlike traditional lenders and their lengthy processes, factoring companies work quickly, getting you fast cash when you need it most. In fact, some trucking company owners might suggest getting set up with a factoring company as soon as possible so you’re already set up when you need it. Now, you might be asking why is factoring a big deal in the transportation industry? How can it help my trucking business? Here are just a few reasons.

• Factoring is great for new businesses. With a new trucking business, it’s typically necessary to have cash up front to cover the cost of fuel and other expenses involved in delivering your load… before you get paid. Newer small businesses might have a difficult time obtaining a bank loan if their credit history isn’t favorable. Factoring helps you to be able to start your business while avoiding any loans. Factors do not loan any money to you, they simply make the money that you’re owed available to you sooner.
• It can help when you need cash to manage demand increases. When business picks up, you’ll need cash flow to hire more drivers and for other expenses involved with keeping up with demand. Rather than waiting for payments, you can pay your drivers and yourself in advance with the cash you receive from factoring.
• Factoring is debt-free. Starting your own business doesn’t always mean you have to go into debt. You can avoid loans by funding your business with freight factoring. You’re getting paid for your job, just in advance minus a small fee, and you won’t be in any sort of debt to the factor when it’s all said and done.
• It can help grow your business. Taking on more jobs and growing your business can prove to be difficult when you’re short on cash to hire more employees, pay for fuel to get to additional jobs, etc. You can use factoring to get your payments upfront so you can afford to complete additional jobs, therefore expanding your business.
• Factors will help track your invoices. Invoicing clients and collecting their payments after the jobs are completed can be a hassle. You might not receive that payment for 30-90 days (depending on your terms) after your service is provided. Don’t try to manage your accounts payable or hire extra staff, instead your factor will keep track of your invoices and take care of collections.
• It provides flexibility. Factoring offers major flexibility because it allows you to choose when you use the service. If you have a few clients you need to factor invoices for, but not the others, that’s okay.