Reasons Why You Should Start Factoring Your Freight Bills

achievement-18134_640Factoring is a financial tool that aids you to get immediate money against your credit sales so that you do not need to wait too long before it matures. Factoring has been a part of the business sector for hundreds of years and has acquired a new shape with the changing needs.

Cash is made instantly accessible by a factoring company, which in normal circumstances, would take months to recover. The factoring company disburses the cash immediately against the invoice, which is kept as security.

Truck factoring is the process in which truck factoring invoice firms purchase invoices only from the trucking and transportation firms. The cash that these trucking firms, big or small, get from factoring companies helps them to regulate their work with a smooth cash flow. In the trucking companies, cash comes only after a stipulated time of 60-90 days. In this scenario, factoring comes as a welcome respite to these companies where the deficit of money might hinder the smooth working of the firm.

A fee charged by these factoring companies which varies from 1.5% to 7% depending upon the volume of invoices factored and time taken for the same invoices to get cleared. This might seem a high fee, but when one looks at the larger picture, then the benefits one gets, regarding cash flow and saved time and energy, is very reasonable.

The main advantage of factoring invoices is that the company gets the much-needed cash flow to run the business smoothly. This is done after the negotiation of the fee of factoring firm is decided, and both parties have agreed upon a final rate. Once finalized, the factoring company pays around 60-90% of the invoice as the advance, decided earlier. Thus, the other firm gets its cash in hand.

When a firm starts factoring its invoices it saves not only on time but also on the number of employees who can then be directed towards other important jobs rather than employing them to extract dues from clients.

As trucking firms have ready money, it also boosts their buying or procuring power, enabling them to make better deals. They are also able to get benefits of bulk procurement discounts. Ready cash flow also helps in expansion through marketing and production and subsequently increasing sales. This comes as an overall boon for the firm that has chosen to factor for its freight bills.

A great benefit of factoring freight bills is that it provides the company with a detailed and clean portfolio of its accounts receivable. Ready cash improves the financial statement and saves a company from falling into a debt trap. Moreover, there is no need to look back to traditional banks for any financial assistance as the factoring companies provide the required amount of cash flow for the smooth expansion of business. This way the company is saved from paying the high interests rates charged by banks on loans.

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How Can Freight Factoring Help Your Trucking Business

truck-303460_640If you run your own trucking business, then you might be painfully aware of the fact that a lot of cash is required on a daily basis to pay fuel bills, drivers’ salaries, routine maintenance and repair bills and your other employees’ salaries. Since most of your clients could be paying you after a period of 30 days, meeting these routine expenses could pose a serious challenge to the growth and survival of your trucking company.

In such a case, you might wish for money in your hand, whenever you need to pay for your routine and even unexpected expenses, such as sudden repair bills or tire replacement bills. You could apply for a bank loan, in order to take care of such expenses. But, if you have just entered the trucking business, then banks would impose restrictions in the form of collateral or guarantors, in order to secure themselves against a bad loan. You might also need to provide your audited financial statements for the previous 3 years showing your profit figures, which would not be possible, if you were new to this line. You would have to repay the loan along with interest in the form of regular monthly installments for a fixed time, failing which the bank could take possession of the collateral offered by you, while availing the loan.

This unique need has created a financial tool known as freight factoring. Freight factoring companies offer you immediate cash against your credit invoices after deducting a factoring fee. They purchase your credit invoice and wire you the invoice amount after deducting a factoring fee of around 1.5% to 5%. This fee will be based upon the business that you generate for your factoring company, the number of days that you have extended to your credit clients and the credit rating in the eyes of your factoring company.

The factoring company might also retain another 5% to 10% of the invoice amount as security, although this would depend on the arrangement that you have with your factoring company. This means that instead of a fixed amount, you can get varied amounts at regular intervals depending on the amount of invoices that you have factored with the company. Thus, as your business grows, you might submit larger invoices to the factoring company, which in turn will provide fatter funds for your business.

Freight factoring will first and foremost help your trucking company by providing instant money without going through the hassles of providing collateral or audited documents. This money will immediately improve your cash flow and enable you to clear your daily bills such as fuel bills, drivers’ and other employees’ salaries, truck servicing and other repair bills, etc. Freight factoring will also enable you to take on new hauls, which previously would have seemed impossible due to shortage of funds. Freight factoring companies can also take over your receivables by collecting your payments from your clients on the due date, albeit at an additional fee. This too will enable you to divert your energy towards increasing sales rather than running after erring clients.

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Freight factoring for trucking company

road-train-1021563_640Freight factoring is a means that is of great help to the truckers. It helps them in getting paid immediately for the work they have done. A factoring company purchases invoice at discount rates from trucking companies and pays them cash in return. These factoring companies then collect the amount from the clients. Many trucking companies rely on freight factoring because it helps them a lot especially during those tough times when they need cash the most. It ‘s hard for a trucking company to wait until 30 to 45 days for receiving payments from clients.


By selling your invoices to these factoring companies, your cash flow worries are lessened. These companies help you in getting the money you need for meeting the financial demands. The biggest benefit is that you can cash without any extra debts or without going for any loans. The factoring is based on the creditworthiness of the customers.


It is better than a bank loan because if you take loans for such expenses, then you would find difficulty in getting loans when you need them. Moreover, these factoring companies handle many of the duties which otherwise would be tough for us to handle. They’ll do billing and collection both for you.


A good company will handle everything related to factoring and will help you in getting immediate cash. With some of the companies, you can even check your accounts online. Look for the one that offers the high amount of advances for your factoring industry.


When freight factoring companies pay you almost your entire freight invoice value within two days, this not only improves your cash flow to enable you to pay your fuel bills and other expenses but also takes care of your collection end and helps you to increase your business. You can now take on more freight deliveries and earn more in the long run. It also removes worries about delays in payments from your customers. Hence, a freight factoring company is more than just a way of finance. It is an extension of your business.


So, if you have a trucking company, it makes sense to use the services of a freight factoring company to help you grow your business.

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Financial Tips For Starting A Truck Driving Delivery Service

trucks-1There are a lot of advantages to being an employee driver for a great trucking company. On the other hand, there are also advantages in becoming your own boss through buying a truck and moving into the ranks of the owner-operators. Not all owner-operators are going to work independently and many contracts with larger trucking companies as lease drivers, which definitely has benefits.

This combination of being on contractor, if you will, leasing your rig and your services to a big company offers a lot of flexibility and options. You can still have greater control over your loads and routes, depending of course on the terms of your contract or agreement with the company. You also have less hassle in trying to book loads, manage clients while on the road and make sure that you are staying on top of marketing and advertising. In some ways it may be the best of both worlds, but it is not the perfect match for every driver.

Moving from an employed truck driver to being your own rig owner and operator is a serious decision that shouldn’t be entered into lightly. There are many different factors to consider and not the least is the initial expense of the rig, insurance and all the expenses of starting up a business.

Let’s see some financial tips for this kind of business.

The Expenses involved in the Truck Driving Delivery Service

real-truck-driverMost people want to start out with a new tractor trailer rig, but in the real world this is rarely an option. This is especially true if you are a typical middle income earner that already has the expenses of daily living to contend with. A rig will cost as much as a small home in many areas, but, unlike a home, it is not as easy to find lenders that will back you. The actual manufacturers will typically lend to most people that meet financial criteria, but they may not have the best interest rates on the loan.

You may want to opt to buy an older rig from a larger trucking company fleet. This is a lower cost option and, if you have worked for the company, you have a good idea of their routine maintenance and vehicle care. There is also the option to buy a rig privately and this option tends to have the lowest overall price. It is also the option that leaves you the least recourse should there be a problem with the truck somewhere down the line.

If you can find a lender or have the credit that allows you to pay money for the truck you still have to insure the rig. The costs of this insurance will vary based on the types of loads you haul and other factors. Fuel, maintenance, licensing and other costs all come into play and are an ongoing expense that has to be calculated into the costs of doing business.

icon175x175While you may be able to rely on your own skills to limit your overall expenses, the time that you spend doing these tasks is time you aren’t out on the road making money. This needs to be factored into the equation to determine if hiring someone else may actually be more cost effective based on your own particular situation.

The true issue is pricing and being able to actually make a profit. Since the large companies get huge discounts with repairs, maintenance and fuel they are typically going to be able to offer lower prices to their consumers. Most people, especially when economic times are tough, look for the lowest price.

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