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How Freight Factoring Can Help Companies

By: Pay4Freight

Freight, trucking, and logistics company understand that it is hard to operate a company while waiting for invoices to be paid. Actually, some companies settle their bills 60 days after the job is completed. However, that does not mean that the trucking company will have to wait after 60 days to pay for their bills. Of course, they have to meet their day to day expenses, pay their employees, buy fuels, and keep their vehicles properly maintained, no matter how cash strapped they are. Many trucking businesses depend on obtaining bank loans to keep the business running however, they can also opt for another method of obtaining cash without ever burying the business on debt. That is through freight factoring.

What is Freight Factoring?

Freight factoring is also known as invoice function, PO financing, and accounts receivable factoring. It provides easy cash to trucking companies who are in need of instant financing for their day to day operation. Instead of waiting anywhere from 30-90 days before the bills are settled, selling the invoices to a freight factoring company will allow them to have money in 7 days. These gives them the money they need to pay for their employees, transportation costs, fuels, and maintenance. Any spare cash available can be even used to expand the business and take in new jobs without the need to resort to loans.

The Process of Freight Factoring

The process of freight factoring is very simple. It involves two things: the company’s invoice and the factoring company or factor. The factor buys the company’s invoices for a cash and collects the invoice for a minimal fee later. The fee usually amounts from 1.5 to 3 percent of the cash receivable.

Here is a good example so you can have a better grasp of how freight factoring work:

A Trucking Company has just completed a job worth $50,000 for a client with a very good credit. The company has already invoiced its client and expects to get paid in 30 days. This means that the company will not have enough money to pay for the driver, gasoline, as well as other expenses in 30 days. And since they do not have the money, they will have the difficulty to finance the business. Luckily, they decided to approach a freight factoring company. The factor gives A Trucking Company a cash advance worth $45,000 for the invoice and collects the payment later. Upon collecting the money, they will release the remaining $5,000 minus the 1.5% - 3% service fee. A Trucking Company gets to solved its problem!

Such is the benefit of getting the service of a freight factoring company. It is one opportunity of getting cash to continue and even expand the operation without falling for debts.

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