Freight bill factoring is a great way for trucking companies to meet operational expenses. Freight factoring companies 'advance' up to 90% of the freight bill and pay the balance when the customer clears the freight bill.
It is a long haul for most of the freight carriers. The truckers would have exhausted their credit sources for financing the trucks. Day-to-day expenses such as the salaries for the driver and assistants, fuel, maintenance, and repairs relentlessly demand additional investment. Transportation factoring, is a semi formal method of financing which help trucking companies to tide over the difficulties.
If you are a trucker, then the scenario is too familiar to you. Due to the fierce competition, you have extended credit facility to customers, even beyond the accepted trade practice. With the economy having blown a tire, customers too have their backs to the wall; and bargain as hard as nails. All this may lead to situations where, you may find it hard to find money even to pay the toll. Freight bill factoring is a formula that can help you to climb out of the tight corner.
In fact, there are thousands of instances, where truckers availed the benefits of freight factoring and expanded their business. These were cases where the concerned truckers were about give up lucrative contracts, just for want of money to pay for the fuel and the drivers.
How does Transportation factoring differ from the regular financing channels? That they are more flexible and understanding than the commercial banks is the most important difference. Freight factoringcompanies accept the freight bill itself as a valid collateral and advance you money.
Freight bill factoringcompanies do not have protracted procedures; they do not ask for IRS returns, credit ratings, hypothecation history and all the never-ending documentation that regular banks are fond of demanding. Transportation factoring companies are far less rigid.
As said right at the beginning, the system works in a simple way. You need to authorize your customer to forward payment to your freight factoring company. With that stipulation on hand, you accept goods for transport and get the customer to endorse the freight bill. Present it to your freight factoring company; they will immediately release payment up to 90% of the freight bill. When the customer pays the bill, the transportation factoring company pays you the balance 10%.
You need to pay the service charges until the freight factoring company receives payment from the customer. The charges vary with the credit period, amount and the freight factoring company. Usually, the charges range between 1.5% and 3.5%.
Freight factoring is the simplest way for truckers to get money for paying the daily expenses.
Martin Wynn
