If you have a trucking company, how do you manage the cash flow? Have you ever considered the solution called as freight bill factoring?
What is freight bill factoring?
Freight invoice factoring or freight bill factoring is a must use option for the trucking companies who often face cash flow problems. This way, they immediately receive cash from the unpaid bills. As you get a big amount of money in hand, you can pay for many things such as raw materials, employees’ salaries, overhead costs, and much more.
The concept of invoice factoring is not uncommon. It has become one of the most popular funding options for trucking companies.
Types of factoring services
There are two types of factoring. One is the recourse factoring, and the other one is the non-recourse factoring. Many companies offer both of these. it is critical to know the difference between them.
In the non-recourse factoring, if the clients do not pay the factoring company the bills, you remain protected. If your customers fail to pay, you will not be held financially responsible. In a non-recourse agreement, the factoring company bears all the risk. Hence, the fees in the non-recourse factoring are higher as is a better choice for the trucking companies who cannot afford to take that kind of financial risk.
In the recourse factoring, your company will be held responsible if the debtor refuses to pay the invoice. The fees of the recourse factoring contract are lesser because you are taking the risk in the case of non-payment from the customers.
What is the process of freight factoring?
The freight bill factor follows a definite process. The first step is to deliver your load. Then, you have to submit a copy of your bill or invoice to the invoice factoring company. It is also called as BOL or bill of lading. You can submit the paperwork by email or FAX. The invoice factoring companies sometimes also offer the companies to upload paperwork through a web portal.
Then, the factoring company verifies the invoices. After the verification, you get money on the same day. Finally, when the invoice is paid by your client, you get the remaining money as well. The factoring company releases the remaining money after deducting their factoring fee.
What are the benefits of freight bill factoring?
The freight invoice factoring has many advantages, such as:
- It is easy to get this type of financing because unlike traditional loans and other financing solutions; you get the money even when you don’t have the best credit.
- This financing option provides you with a quick loan. The customers pay the amount in 30 and 90 days, but the invoice factoring will provide you with advances on the same day.
- It also saves your time on collections.
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