In a Freight bill factor, the trucking company sells its outstanding bill to a factoring company or financial institution and gets cash in return. Most likely, the bills are converted into cash within 24 to 48 working hours.
Such an arrangement between the factoring company and the business company is to provide working capital to the business company who can use this amount to pay for daily expenses, repair costs, fuel costs, salaries to their staff, credit to new customers, etc. The Factor company buys the invoices and you don’t have to worry about credit repayment risk.
Factor Staffing Agency is used by almost all freight, rail, and trucking companies. It is an important part of the transportation industry. Due to difficult payment scenarios where the clients are known to make delay6es payments to the transport companies, the factoring company has a big role to play and solve their problems. The cash flow problems are common in this industry and the company demands immediate payment. That is why many transporters rely on freight bill factoring to maintain their cash flow.
The factoring facility allows them to get paid in around 24 to 48 hours. Another advantage is that the factoring companies do not require a lot of paperwork unlike a business loan and furnishes cash to the trucking business in a little time.
How does it work?
Now that you know the meaning and benefits of Freight bill funding or freight bill factoring, it is imperative to understand how it works.
The trucking business sends its outstanding invoices to the factoring company. the company checks all the documents and verifies them. Then, the payment is advanced almost immediately for work. After buying the invoices the factor advances around 90% of the money in cash and holds up the remaining amount till the time the clients pay them back. After receiving the money from the clients, the factoring company pays the rest of the amount to the transport company. the factoring company also deducts a small percentage of this amount as their fee.
How does Factoring help a freight business?
These are the points that help you understand the advantages of freight bill factoring:
- It allows sufficient funds to the business company so that they can pay for their expenses such as fuel, vehicle maintenance and repair, drivers’ salary, licensing fees, insurance, and other expenses
- Allows the business to operate in a more efficient manner
- Makes the money available for bidding and future contracts
- Expansion of the company
- Invest in various marketing and promotional activities to gain new business contacts
- Factors charge only 1% to 5% rate for their services.
- Assesses the creditworthiness of your clients.
