trucking companies understand how difficult it can be to try to run the operation while waiting for the bills to be paid. Some customers may not pay until 60 days after the job is completed.
Meanwhile, trucking companies must continue to pay their bills in order to keep their business afloat, some times very little money. Labor must be paid and gas purchased without money from customers (at least not for 30-90 days).
Many trucking companies are forced to rely on credit to keep their businesses going or risk losing everything. One option that is starting to be used by many companies in the industry’s freight bill factoring.
Freight bill factoring provides trucking companies with quick cash. Instead of waiting 30-90 days to get paid for jobs they already have, they can be paid in 7 days from the factoring company. This gives companies the money they need to pay their drivers, improving their transportation costs and also take on new jobs, all without taking on any new debt.
process elements (also referred to as funding bill, PO financing and accounts receivable factoring) is simple. It includes two, company accounts and Factoring companies, also known as factor. The factor buys accounts of the company for cash and then collects this accounts for the company for payment. Typically, this fee is somewhere in the vicinity of 1.5% -3.5%
Here is an example :. Super Road Trucking Company may have just completed $ 50,000 job for customers with very good credit. They have invoiced their client and expect to be paid in 30 days. This means that Super Road will not be able to use money from customers to pay their drivers, gasoline or other related expenses for that job. Because they do not yet have the money and they are having trouble financing new business and have rejected several large contracts.
They decide to use Factoring companies . The factor pays Super Road $ 45,000 account and then collect it themselves. After getting it, they return it to the Super Road, minus agreed fee. Problem solved, further damage averted. Super Road gets the money they need and are now able to continue operating.
Hopefully, you are able to see the benefits of freight bill factoring. It is an opportunity for truck companies to get funding to continue or expand operations without taking on any new debt. It is important to note that this works only if the company or person who owes the balance of the account has good credit. This provides insurance for the factor that they will get their money after fronting it for the company.
standard charges for this type of service vary but often fall somewhere between 1.5% and 3.5%, although it may vary. The cost will be affected by invoice periods. If the company expects a 60 day turn around, they will be charged more then the company has 30 days turnaround. This is because it may take longer for the element to add capital.