All You Need To Know About Freight Bill Factoring

By: Kris Koonar

For any trucking company, hauling goods around requires instant cash to take care of fuel bills, salaries, and recurring expenses such as truck servicing and tire replacement bills and also unexpected expenses such as breakdowns. If you are praying to god for relief, then your prayers have almost been answered, with a little "Factoring Fee" of course!

When you deliver freight for your customer or even for a freight broker, you will have to make a freight invoice. Depending on the credit taken by your customer or broker, you will then have to wait for 30 to 90 days for your payment to arrive. This puts a leash on your business, since you cannot take on any new or big hauls, until you get your previous payment, which will help you in meeting your cash expenses. This in turn restricts your business growth. Enter the freight factoring company. These companies will "buy" your original freight invoice off you and make you the payment in 2 installments.

The 1st installment will be within 24 to 48 hours and will be upto 90% of the invoice value. The 2nd installment will be made, when your customer pays up on the due date. The freight factoring company will deduct their 'factoring fee' or 'charge' from the 2nd installment. This fee can be from around 1.5% to 5% of the invoice value depending on various factors such as your credit period to your customer, the credit worthiness of your customer according to the factoring company and the total volume of business, which you give to the factoring company. The lesser the credit days of your customer, the better your credit worthiness of your customer and the higher the amount of business you give to your factoring company, the lower will be the factoring fees.

This could be a god-send for your freight business, since this will improve your cash flow tremendously, thereby enabling you to pay off your fuel bills, salaries and enable you to go on expanding your business by taking on more hauls without worrying about cash payments. Freight factoring companies can also take over your bill collections, hence freeing you from the tensions of late payments. You and your staff can concentrate ahead rather than looking behind constantly for late paying customers. This is better than taking a loan from a bank, where you would have to submit documents and collateral and would in any case have to pay interest on that loan. Many factoring companies also use non-recourse factoring, where the risk of non-payment of the invoice is their headache, thereby freeing you from bad debts.

You can find out about various freight factoring companies through their advertisements in newspapers and even the Internet. Crosscheck their references before hiring them. Find a freight factoring company, which can match upto your size of business, so that they can provide you an optimum level of service. Even if their percentage of fees is marginally high, it is still better to hire a factoring company, which gives you better service, since they are a link between you and your customer and they have to be in-sync with both.

So, try using the services of a freight factoring company. This will not only help your cash flow, but also propel your trucking business on the smooth road to success.

Money Management
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