Trucking companies often experience financial difficulties because of the gap between the time they finish performing services for clients and the time when they get paid. An effective solution to this problem is freight factoring. Here are some of the advantages of using this method to fund your business.
Receive Funding Even with Bad Credit
Although traditional banks will only offer loans if your business has superlative credit, you can finance your company with freight factoring even if your credit score is low. Factoring companies are more concerned with the creditworthiness of your customers. As long as the payment histories of your clients are good, you can easily qualify for factoring.
Strengthen Company Cash Flow
There is typically a 30 to the 90-day gap between completion of your services and payment by clients. During the interim period, your cash flow can suffer, but you still need to pay for the salaries of your employees, insurance, fuel, and equipment replacement and repairs. With freight factoring, you can get up to 97 percent of invoice values almost as soon as loads are delivered. When your clients pay in full, you receive the balance minus a factoring fee.
Obtain Financing Without Debt
Utilizing freight factoring is not the same as taking out a loan. Instead, it is an advance you receive based on the value of your unpaid accounts receivable. As such, it does not qualify as debt on your company’s books.
Avoid the Time-Sink of Collections
Freight factoring not only provides you with an advance on payments to strengthen cash flow, but it also offers back-office assistance to handle collections. Once you sell accounts receivable to a factoring company, the factor takes over the tedious process of collections, leaving you free to run and grow your business.
For more advice on using freight factoring to help fund your trucking business, get in touch with Sierra Financial.