You Need Partners That Understand Your Business in Freight Factoring
Business Solutions The future looks bright for the trucking industry, but the pressure of technology requirements and driver compliance persists.
According to key economic indicators, the U.S. economy has a lengthy robust period ahead. So long as the current NAFTA negotiations, volatility in the stock markets, pending interest rate hikes and inflation don’t curb growth, the trucking industry has good reason to feel optimistic. This is great news for struggling freight carriers that continue to face ongoing challenges. The ever-present financial pressures of technology requirements, regulatory compliance, driver related issues and numerous other cost factors will continue to impose difficult conditions threatening profits and sustainability. Trucking companies that enact financial strategies, such as freight factoring, to permit easy access to working capital, will have the ability to invest in the resources needed to meet these challenges.
The end of 2017 marked the beginning of what is predicted to be many years of increased demand on freight capacity and rising rates. Although this is a positive trend for the trucking industry, it also presents an extremely difficult business environment to navigate. How do owners and fleet managers of trucking companies plan for growth amidst stiff competition, escalating costs and economic uncertainty?
Freight Factoring is a particular form of invoice factoring designed specifically for trucking companies providing easy qualification, fast funding, easy document submission and ease of use.
Funding options available to freight carriers and brokers is extremely limited and one of the industry’s biggest obstacles to sustained profitability. The commercial banking system is inherently risk adverse. The stringent qualification requirements to secure an operating line of credit is far too restrictive for most small and medium size fleets. Before any bank lends money, it needs to be satisfied that the business can sustain operations as it manages the debt payment. As commercial banks typically regard the transportation industry to be volatile and unstable, they generally avoid lending money to trucking companies.
Freight factoring is the ideal solution for carriers and brokers facing this difficult obstacle. A trucking company’s most valuable assets are the invoices they issue to customers upon delivery of each load. Factoring is not a loan, it is the selling of these invoice receivables at a discount in exchange for immediate cash to create positive cash flow. The process is simple; deliver a load, invoice the customer and send copy of invoice to the factor. The factoring company verifies delivery of load and advances payment within 24 hours, then waits to be paid by the trucking company’s customer. Advantages of freight factoring include; easy qualification, fast access to cash, inclusive account receivables management, risk mitigating support, plus numerous additional features depending on the factoring company providing the service.
Choosing the best factoring company to partner with is a critical first step in implementing this financial strategy. The benefits are potentially extensive, but the anguish resulting from choosing the wrong factoring company to work with can be equally devastating. If the factoring company is not customer focused, lacks transparency or does not fully understand the trucking industry, there will undoubtedly be service issues that will impact access to your money. Ensure to perform proper due diligence; research the candidates, interview them and choose accordingly.
Most invoice factoring companies serve a multitude of industries, only a few are industry specific. Be sure to partner with a factor that understands your business. Freight Factoring is a particular form of invoice factoring designed specifically for trucking companies providing easy qualification, fast funding, easy document submission and ease of use. Factoring fees range depending on the factoring company, but typically are much more competitive than general accounts receivable factoring fees.