Avoid Late Payments with Truck Factoring
Entrepreneurs in the trucking industry often have difficulties with cash flow. This is because after you make a delivery, you may have to wait up to 60 days or even beyond for payment. At the same time, you still have ongoing expenses and want to get on to the next job. A practical solution to this problem is truck factoring. Here is some important information about this method of financing.
Truck Factoring Basics
Other terms for truck factoring are trucking invoice factoring and transportation factoring. This type of funding involves selling your accounts receivables to a factoring company so that you have the finances you need to run and grow your business.
Truck Factoring Procedure
When you factor in your trucking invoices, you first find a job from a shipper or broker, deliver the cargo, and obtain an invoice. Rather than wait to get paid by the broker, you submit the invoice to a truck factoring company. You then immediately receive an advance of a percentage of the value of the invoice, known as an advance rate, and the factoring company assumes responsibility for collecting payment from your broker. You receive the balance of the funds owed to you minus the factoring fee after your broker has paid.
Advantages of Truck Factoring
The rapid payment process of truck factoring provides you with steady cash flow so that you can meet your expenses and continue to accept new work. You also save time because the factoring company assists you in handling the collection of invoice payments. This allows you to focus on the needs of your business. You can obtain this financing even if your credit rating is not good because the factor is more concerned with the credit score of your shipper or broker. The non-recourse option of truck factoring means that you will not absorb the losses if clients default on their invoices. Additionally, since this form of funding is not a loan, your business does not incur debt.
For more advice on truck factoring, contact Skogen Capital Lending.