Did you recently begin a transportation company? Are you hoping to take your existing company to another level? Strong cash flow is crucial to long-term business success in the trucking industry – and various other industries. Experienced truckers often highly recommend a factoring partnership for startup companies trying to flourish in business.
Essentially, freight factoring is just a massive deal in the transportation stratosphere. Why? When should a business owner utilize freight factoring? In this content below, we explore factors, the very best time as a transportation company to check in to a partnership, in addition to a variety of benefits related to the service.
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What is Factoring?
Merely speaking, factoring is a financial service whereby an economic institution – or factor – purchases accounts receivable from a company, typically at a reduced rate. This rate is known as a factoring fee. Each time a transportation company sells the accounts receivable, they immediately receive cash. The factor is then legally entitled to get paid for the invoice. Thus, factoring provides new transportation companies with the capability to receive a consistent cash flow to keep trucks, employees, and day-to-day operating expenses.
Why Not Just Choose Traditional Bank Financing?
Trucking companies may wonder why factoring proves more beneficial than traditional bank financing. Primarily, qualifying for factoring services is based upon the creditworthiness of a trucking company’s customers – not the business itself. Companies with a history of integrity and honesty are often chosen for a factoring partnership; however, the weight of decision largely rests on the trustworthiness of a company’s clients. Additionally, speed is another consideration. Trucking companies can often begin a factoring partnership within several days, while bank loan approval takes time.
Recourse Factoring
Recourse factoring differs from non-recourse in a single, significant way. While associated with a recourse factoring partnership, your trucking company is ultimately accountable for the invoice if the client doesn’t pay in full. To minimize the chance involved, freight factoring companies often provide credit checks to guide in proper, informed decisions before accepting a load.
Non-Recourse Factoring
Non-recourse factoring protects the trucking company from falling into debt, should a client fail to pay the invoice. If this happens, the trucking company isn’t legally responsible for paying the bill. Instead, the factor takes the chance of the freight bill not being paid. As you can assume, non-recourse factoring fees are generally a little more than recourse factoring. However, this approach is frequently best for a new transportation company that cannot correctly handle the chance of a client who doesn’t pay.
When Should I Utilize Freight Factoring for Trucking?
As mentioned, factoring trucking professionals with years of experience often recommend freight factoring the moment possible. You must utilize freight factoring as a new company, trying to flourish in the future, or an existing company in need of consistent cash flow to grow and develop. Immediate, reliable cash flow is vital to a startup transportation company. Processing payments does take time, emergencies arise, and clients sometimes fail to pay in full when required.
Furthermore, as a new business, you may not possess a powerful, optimistic type of credit – often the only path to get access to funding as a company. Freight factoring companies recognize that startup companies are frequently lacking any conventional kind of recognition. Startup companies often do not need enough time or expertise to handle invoicing and collections without stress correctly. Freight factoring companies take the typical accounting responsibilities related to invoicing and supplies, enabling you to manage other daily tasks with peace of mind.
Finally, fluctuation happens in business, and freight factoring partnerships provide the flexibility startups require. Most factors require long-term contracts, but Advanced Commercial Capital doesn’t lock you into a long-term contract. Instead, the service is provided as you need cash flow to fund your business.
What are the Benefits of Freight Factoring?
- Factoring Is Debt-Free
Debt can be an unavoidable necessity and often related to starting a business. However, in the transportation industry, this is not always the case. Funding your trucking business with freight factoring makes for a debt-free business startup because factoring isn’t comparable to requesting a loan.
- Factoring Is Beneficial for a Growing Business
When demands related to business growth weigh on your shoulders, factoring has an incredible opportunity to hire drivers and purchase trucks before receiving payments. As demand increases, factoring allows you to fall in step with business growth and thrive in the industry.
- Factoring Offers Flexibility
As mentioned previously, freight factoring with Advanced Commercial Capital could be a short-term arrangement. Still, it may also be a long-term financial tool to help you meet your business goals. If you want to factor in some but not your entire invoices, that’s perfectly acceptable. Factoring is designed to aid trucking companies as needed – and certainly not be an all or nothing service.
- Factoring Allows for Invoice Tracking
After lots are delivered, a trucking company might not receive payment for 30-90 days, depending on the specific contract. But through factoring, trucking companies get paid immediately. Additionally, factors generally record invoices and handle collections, so you don’t have to.
Advanced Commercial Capital
At Advanced Commercial Capital, we provide the very best service most abundant in competitive rates in the factoring industry. We always keep our client’s best interests in mind, specialized in doing everything possible to help our clients succeed greatly. We see ourselves as your financial partner. Below, we’ve listed a few benefits related to working alongside our company:
- No long-term contracts
- No application fees
- No setup fees
- No termination fees
- No monthly service or maintenance fees
- No liability for you if the debtor doesn’t pay
- None of your money will be held in reserve
- Non-recourse factoring – we take all the chance!
- Payment with legible copies
- Education with a patient, experienced staff
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These benefits are only a small sampling of the industry-leading factoring services we offer! To find out about our company, feel free to provide us with a call today at 855.465.4655 or touch base via our online contact form. We anticipate helping you find the proper financial solution for your needs.