All You Need To Know About Freight Broker Factoring

By: Kris Koonar

Operating as a freight broker can economically be very profitable. At the same time it may also prove to be extremely difficult on account of the smooth and regular cash flow that is required to run the business profitably. As a freight broker you are expected to pay your drivers on time. In addition, you have other regular expenses of the business to meet. However, compensation for your services are difficult to come by when you require them most. The prevailing norms of the transporting business force you to wait for thirty to sixty days for payments to come from your clients. This adds to your woes. Your drivers press you for payments and your clients make you wait for payment.

What can you do to tide over this problem? You can look for alternate sources of financing your immediate business expenses. One way is to seek bank finance. However, bank finance is difficult to obtain and you have to go through a tedious process which requires submitting a host of supporting documents and proof of successful and profitable business operation for at least three years immediately preceding the time you submit your loan application. If you are new to your freight brokerage business it will be nearly impossible for you to obtain bank finance.

Then what can you do? Do you have to close your business for lack of adequate cash flow? Not at all. The simplest and easiest way out of this quagmire of financial trouble is to seek freight brokerage factoring service. This is a very effective and convenient way to turn your slow paying receivables into much needed cash for current business expenditure. Obtaining freight brokerage factoring is also easy. The factoring company would look at the long term prospects of your business instead of your past business performance/profits to decide upon extending factoring services to you.

The most important aspect for consideration for qualification is the quality of your clients. Dealing with reputable and credit worthy clients will serve to get your freight invoices financed with ease. Therefore, it is less of your reputation and standing and much much more of the standing and credit worthiness of the clients you provide service to which acts as a determinant for qualifying you for finance through factoring of your freight bills. When you are a freight broker most factoring companies work side by side with you to find ways in which you can pay your drivers on time; some even reimbursing your drivers on your behalf and also assisting you to manage your back office operations.

Typical functioning of freight brokerage factoring operations work in the following manner:

Immediately following delivery of transported freight, copies of the bills are sent to the factoring company.

The factoring company pays you the value of the invoice less their fee with 24 hours of receiving the bills.

This makes funds instantly available to you for making payments to your drivers and other immediate business needs while the factor waits to be paid by your clients.

Once the client pays up, the deal is settled.

In factoring, finance available to you increases with the total volume/value of your invoice over time. Greater overall invoice values and timely payments by your clients to the factor also make higher amounts of finance available to you at lower rates.

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