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. The freight companies have to wait for their customers to come by and pay the money they own them. There are other expenses that the freight companies have to settle like paying the wages, fuel and maintenance cost. 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 organizations have interrupted cash flows as they wait for customers to pay bills for their services.
The issues of poor cash flows leads to depending on the freight factor. The factoring can be termed as a short-term lending and the invoices acting as the collateral. After the trucking or the transporting companies deliver their services to their customers they sell the invoice to the freight company. The freight company after buying the invoices they pay the shipping company in installments. They pay the full invoice amount when the company completes paying 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 some factors that qualify a business for the freight factoring. The factors include the business cash flow, terms of payment of each account, the amount of money owed and how loyal your customers are in paying the bills. You will only know if your company is eligible for the freight factoring after you put all the factors into consideration.
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. The factoring company first makes sure that your customers have an excellent commercial credit and can pay the bill at the time they stipulate. 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.
Compare their application fees, advance rates, and their monthly minimums. Do your research and find out how they deal with the unpaid invoices. Your research will prove to you that some of the companies accept the full responsibility of the unpaid bills. Others require their clients to pay them is the invoice is unpaid within the specified time while some will ask you to replace the unpaid invoices of the non-paying customers with the ones from the paying customers.