Freight factoring is a very reliable and convenient method that transportation companies use to ensure there’s efficient working capital. Factoring refers to money that is advanced on accounts receivable (open invoices). The factoring company (factor) does this by paying the transportation companies for their invoices right away then collects payment from those freight bills from the respective customers or brokers at a small fee. Some of the benefits of using freight factoring companies are as outlined below.
Working capital is crucial for transportation companies to ensure smooth running of operations. It meets fuel payments, repair and maintenance of the company’s fleet, driver wages, insurance premium payments, purchase of new vehicles among other overhead costs. Freight factoring thus provides a flexible and convenient method to get the much needed working capital. Since, as compared to bank loans; it requires less documentation, it is fast to set up and obtain. This is because it mostly requires the customers’ credit worthiness rather than the trucking company’s credit worthiness. However, credit line is easily increased as per necessity unlike fixed bank loans. Fuel cards issued by reputable freight factoring companies are honored across the country for fuel as well as repairs.
Freight factoring companies collect details about available loads from shippers and assist transportation companies by availing the information on the website or by alerts. Thus, factors further business leads to transportation companies at basically no fee. Furthermore, truckers can go forward and take new loads and shipments due to the discovered steady cash flow. Transportation companies no longer have to worry about the collections.
Extensively, some few freight factoring companies assist truckers to obtain permits as well as maintain motor haulers licensing formalities as required by law. This includes permits from; the Federal Motor Carrier Safety Administration. (FMSCA) as well as the United States Department of Transportation (USDOT), both of which are rather tedious to get. Freight factoring is therefore very beneficial to transportation companies.