How to Finance your Trucking Company with Freight Factoring

Dec 30
11:46

2009

Marco Terry

Marco Terry

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Need financing for your logistics/transportation company? Read this article to learn how to use freight bill factoring to fund your business.

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Fuel. Repairs. Salaries. These three items are ever present in the minds of trucking company owners. These are the three most important expenses of any trucking company and they need to be paid regularly and on time.

Making these payments on time can strain the cash flow of even the most established trucking companies. This is because like most businesses,How to Finance your Trucking Company with Freight Factoring Articles trucking companies have to give their clients net 30 terms to pay their invoices. However, many of the costs are immediate. This creates a gap where expenses are immediate, but revenues are delayed. And, if this gap is not managed properly, the company risks going out of business.

Unless your company has adequate reserves, your only options to manage the gap are to either restrict growth (thus control expenses) or use business financing. Although many owners resort to conventional small business loans, freight bill factoring is usually a better solution for this particular problem. That's because freight factoring provides a quick pay for freight bills, reducing the gap and making it more manageable.

Freight factoring has a number of advantages over a business loan for this specific type of problem. An important advantage is that it's easier to qualify for factoring than it is for a business loan. That's because factoring companies look at the credit quality of your payers when making their decisions. Furthermore, freight factoring is dynamic. Your financing line can be designed to grow in size with freight bill volume, providing a form of financing that firmly supports growth.

Most freight bill factoring transactions are simple. Once your shipper has been credit qualified, you submit the freight bills to the factoring company, who advances you about 90% immediately. Your company gets the reminder 10% (less fees) as soon as your client actually pays.

Factoring is a flexible solution that should be considered by new and growing transportation companies.