Many are the times when the freight companies find themselves with huge pending bills due to the unpaid money by their customers. They always wait for their clients to come on their own will to pay their money. The freight companies still have other expenses to sort such as the maintenance cost of their vehicles, fuel cost, and the wages. There are some of the expenses that cannot wait for long without being attended to like the fuel cost. The company must have a ready capital to settle all the urgent expenses that might come up. There are trucking and shipping companies with problems of cash flow since their customers have pending bills.
The problem of poor cash flow leads them to rely on the freight factor. The factoring can be termed as a short-term lending and the invoices acting as the collateral. After the trucking or the transporting companies deliver their services to their customers they sell the invoice to the freight company. The freight company then pays trucking or the shipping company in installments. The full amount is paid when the freight company receives the whole invoice amount from the client.
Freight companies benefit from the deal by taking some small fee for their services. Factors such as the credit, the time of payment and the worth of the credit are some of the determining factors of factoring charges. There are some factors that qualify a business for the freight factoring. Some of the factors include the business cash flow, the amount of money owed to you in the receivable accounts, the terms of payments of each account and how reliable and loyal your customers are in paying bills. After putting all the factors into consideration then you can know if your company is qualified for the freight factoring.
Make sure you complete your services by ensuring your products are delivered and accepted by the customer. The freight factoring companies helps companies that have insurance cover and a motor carrier authority. They then confirm the commercial credit of your customer and if they will pay the pill by a certain time. Freight factoring companies do not work with companies that have legal issues like the tax problems. Check their range before you think of working with any factoring company.
It is crucial to compare their application fees, their monthly minimums and their advance rate with other similar companies Do your research and find out how they deal with the unpaid invoices. Some of the freight factor companies would be responsible for all the risks. Others require their clients to pay them is the invoice is unpaid within the specified time while some will ask you to replace the unpaid invoices of the non-paying customers with the ones from the paying customers.