How Freight Factoring Can Help Your Trucking Company
November 22, 2017 (Investorideas.com Newswire) In today’s precarious economy, choosing the right type of financing for your transportation or trucking business is crucial. There is a common misconception in the industry that every type of financing is essentially the same. Some people think that money is money, after all. This type of thinking is patently incorrect, however, and choosing the right type of financing can help you not only stay solvent, but continue to grow.
For instance, many people seek out a line of credit or a loan from their bank as a first option. But for companies who are just getting started or who may be facing a down turn, being approved for bank loans can be particularly challenging, especially if your credit is less than stellar. This is why many business owners in the trucking industry are turning to freight financing, a type of invoice selling that is reliant upon the credit worthiness of one’s customer base, rather than one’s actual business.
What Is Freight Financing?
Freight financing is a financial transaction in which a trucking or transport business sells its invoices to a third-party factoring company at a discount as opposed to waiting upwards of 90 days to receive payment from that customer. Because you are selling your invoices, this type of transaction is often known as accounts receivable factoring.
How Does It Work?
If you want to know how trucking companies can lower expenses here is an example of how factoring works: if you deliver freight to a customer generating $1000 in invoices per month, you can sell the outstanding invoices rather than waiting the 2 to 3 months that client often takes to pay. A company like Accutrac Capital, for example, will collect 1.59% of the face value of the invoice as a factoring fee; in this case that amount would be $15.90. The factoring company will issue you the face value of the invoice minus the fee, and will keep an additional 3% in reserve until they collect the invoice from your customer. In this case, your trucking company would receive $954.10 up front (often on the same day you apply). When Accutrac collects on the invoice, the $30 reserve is repaid to you. Essentially this allows you to collect 97% of the invoice value up front and the remaining 3% when the invoice is paid out, for whichyou only pay %1.59 of the entire invoice value when all is said and done.
Who Can Qualify
Qualification for freight factoring is easy as it is largely based on the credit worthiness of your customers, and not on your personal credit or the financial strength of your trucking company.
Accutrac Capital provides financial solutions to:
- startup operations
- companies going through a change of ownership
- high growth companies with insufficient working capital
- companies who can not acquire the funds they need from traditional lenders
- companies experiencing a tough year
If you have receivables from credit worthy customers, the right factoring company can help you retain your cash flow and cover important day-to-day trucking costs such as fuel, salaries, fleet maintenance, and overhead, while also ensuring you have the liquid funds to keep your business growing.
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