[ad_1]
Trucking factors can be a blessing or a curse, and unfortunately the difference can mean success or failure for the trucking business. Knowing how to find a suitable partner Factoring is not as easy as one might think. Often times the factoring company the most easy to find are the ones to avoid. When looking to factoring companies Factor trucking accounts, you should keep a few things in mind. This article should help you find the right Factoring services to your needs and help you to be better.
What is factoring? Invoice Factoring is defined as short-term loans with open accounts (receivables) as collateral. In the trucking industry, accounts are often paid between 45 and 60 days, as opposed to the normal 30 days passed in most other industries. Being so cash intensive businesses, most trucking companies do not have cash reserves to carry open accounts this long. Even 30 days is too long to deliver bills for many small trucking companies. Invoice Factoring is often a solution, provide funds to these accounts within 24-48 hours. However, they can also put a big burden on companies that the fees they impose, from 1% to over 8%, depending on the terms. The fees are deducted from the total accumulated in the account, and in extreme cases, high frequency, can be as much or more than the profit account.
recourse Non-recourse? This is one of the first things you should know about invoice factoring. Recourse means that the component has the ability to ask for a loan back if the customer has not paid for the account after a certain time. This means that factor considers the customer will never pay, and is not interested in trying to collect more. Non-resort is the opposite, where the factoring company buys the invoice (debt) completely, and will never ask for a loan back, even if the account is not paid. As you might expect, Non-recourse type has higher risks associated, and have higher fees
interest The rates you pay for the elements can vary by a few things: .. Credit worthiness of customers, credit, the total amount to be calculated as the average length of time accounts are paid. What you have to be careful of is to know exactly what the business margin. If you plan to factor accounts where the margin is 15% or more, to pay up to 3% or 4% of the top may be worth it to get the money immediately. However, if the margin is 10% or less, and factoring fee is 5% -6%, which is a recipe for failure. Very few businesses can survive on the margins at or below 5%, and those with incomes in the millions. Small trucking companies with revenue under $ 1 million can not live on 5% operating margin -. It is mathematically impossible
Other expenses Be very careful of other services, because the fees they. carry. Getting early for the account, such as the cargo load is secured, usually carries a flat fee. As to send your data through the night mail. These fees are often $ 20 or more each, and continue to eat up your margins. Even though $ 20 here and there may not seem like much – it adds up quickly. Think about it, if you haul an average of 2 full week, and factor all invoices, overnight charges one to send each packet to account factor comes to $ 2000 a year. Use snail mail and save $ 2000. I’m sure you have more than a FedEx and UPS.
When the element accounts and when not to? Invoice Factoring has its place, but it should be a temporary solution. Unless you have a guaranteed price below 2%, the cost factor accounts usually keep your business from being successful. Freight companies are generally run by a small margin, often less than 10%, and pay factoring fees will dig so deeply into profits there is not enough left over to cover growth or unexpected expenses. A smart trucking company owner will work hard to create a cash buffer and reduce the need for account factors.
The bottom line is this, freight invoice factoring can help your small business grow when they take on new business that you otherwise would not have the cash flow to handle. However, there are some pitfalls to watch out for, and almost no one will tell you where they are. The best thing you can do is to do research and make lots of calls. Not only trucking factors companies themselves, but to their customers. Find out about the history of Factoring Company, and how long most of their clients have been with them. Call up the long-term customers and ask lots of questions. The only dumb question is the one you forgot to ask to come back to haunt you!
[ad_2]