Advantages of Factoring your Freight Bills

Choosing the right type of business financing for your transportation company is critical. There is a common misconception in the industry that all financing is the same. After all, money is money. Actually, this type of thinking is incorrect, and choosing the wrong type of business financing can be detrimental to your business.

This article highlights the advantages of freight bill factoring and will help you determine if it is the right solution for your transportation and logistics company.

The most important advantages of factoring freight bills include:

  • High initial advances: Most truck factoring lines provide transportation carriers with high advances. Most lines advance at least 90% of the invoices, and, in many cases, the advance can reach 95%. Some programs also factor fuel advances. Note that this only refers to the initial advance.
  • Quick approvals: Financing lines can usually be approved within one business day of getting a complete application package. In many cases, the line can be implemented and funded in less than a week. As a result, freight factoring can often be used to address a cash flow emergency.
  • Take on more loads: Factoring usually improves your cash flow and allows you to take on more loads and new customers. Why? Simply because you get the equivalent of a quick pay from the factoring company, which provides the funds you need to pay expenses.
  • Improved customer credit quality: Most factoring companies review the credit quality of your existing and new customers, helping you determine which have good payment habits, thereby allowing you to work with the best clients.
  • Works with fuel cards: Most factoring lines are integrated with fuel card providers, offering you extra convenience.
  • Flexibility – supports growth: The biggest – and an often overlooked – advantage of using freight bill factoring is that the financing line can grow with your revenues. While most conventional business loans (or lines of credit) only work for fixed amount, the factoring line can increase easily as long as your customers meet the factoring criteria. This “flexibility” advantage warrants careful consideration. Freight bill factoring can certainly solve a short-term cash flow squeeze, but for owners thinking long term, freight bill factoring can allow for new customers and more loads because they no longer have to wait up to 45 days to get paid by customers. And the factoring line will grow to accommodate this business growth. Few business financing products have this very important feature.

Read this article if you need more information: what is freight bill factoring.

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