Trucking is a profitable business. However, invoice payment can take a significantly long time, which can starve your cash flow, hence affect your business operation and growth. This is where trucking factoring companies come in handy. Factoring companies help small businesses by providing upfront payments up to 90% of the original invoice, hence bridge invoice payment gaps.
Trucking factoring companies buy accounts payable at a discount, hence giving you instant cash. Ideally, they offer an advance for outstanding invoices. Therefore, you get invoices payment the same day instead of waiting for several weeks. This means that you will have a reliable cash flow to grow your trucking business. The companies collect the payment from your customers when the invoice is due and relieve you the risk of the defaults.
While there are numerous transportation factoring companies out there, you should ensure that you are dealing with a reputable company. This guide will help you choose the best invoice factoring services for freight bill factoring.
1. Quick Funding
A factoring company provides funding after you have submitted invoices. While some company provides invoice funding the same day, others may take up to 3 days. The period you have to wait to receive cash is a crucial consideration when choosing a suitable company. If you need cash quickly, you should choose a company that provides money the same day. A suitable company has quick and easy approval. The best company will provide funding in less than 24 hours.
2. Rates and Fees
The rates and fees vary from one company to another. Therefore, you should ensure you know beforehand the fees you will incur when engaging in business with a truck factoring company. Ask the right question in regards to the interest, percentage of the invoice amount, and other fees. Also, ensure you read and understand the contract fully. Choose the most cost-effective company by comparing the fee percentage over the factored invoice.
Note that trucking factoring companies release part of the funding when you submit your invoice. Once the client pays the invoice, they release the remaining amount after deducting the factoring fee. You should inquire about how much money you will receive in advance and the part they retain in reserve. Some bad company includes hidden charges which increase the total fees. The bottom line is to ensure you do due diligence to avoid getting short-changed.
3. Good Customer Services
Different industries have different levels of customer service. In the financial industry, you will most likely want to speak to customer service personnel if you have issues with your account or if you need funding quickly. A suitable trucking factoring company should interact with customers in person. You should ensure you consider the interaction of factoring company you want to enter into a contract with. Ensure you do your due diligence before signing the contract. A good company will offer you a personal account manager to ensure everything is running smoothly. The account manager should be available to answer all queries you may have.
4. Specialization in Trucking Factoring services
Funding truckers are somehow different from other industry funding. A suitable company should understand the freight brokers, trucking companies, and truckers. You should choose a company that has a good background in trucking and logistics.
5. Credit Protection
Trucking factoring companies provide recourse and non-recourse factors. While non-recourse factors offer credit protection, the recourse factors will charge you in case of unpaid invoices. Credit protection means that you will get paid even if the customer defaults on the invoice payment. While the non-recourse factor is a good choice, it usually costs more. Before choosing a truck factoring service, you should consider your strategy for unpaid invoices. If you want to have credit protection in place, ensure your company of choice offers the same services.
6. Additional Services
Besides factoring, a suitable truck factor company will offer additional services. Some of these services include free credit checks, insurance help, complimentary load board access, and fuel card programs.
7. Flexibility
Flexibility is an important consideration when choosing a truck factoring company. You should be able to choose the freight bills you need to factor, and when to factor the same. Find a company that will fund you according to your terms.