Advantages of Factoring Freight Bills

Freight bill financing has been gaining popularity as a way to finance growing trucking carriers. Factoring helps trucking carriers improve their cash flow by enabling them to finance invoices that take 30 days or longer to pay. This article helps you understand the most important benefits of freight bill factoring. To learn more, read “What is freight bill factoring?

Benefit #1: It improves your cash flow

The most important benefit of freight bill factoring is improving your cash flow. This benefit is why carriers use it. Instead of waiting 30 – 70 days for clients to pay for a load delivery, you get immediate payment from the factoring company. This accelerated payment provides the cash flow you need to pay short-term expenses and take on new clients.

Benefit #2: Take on new clients

Most new carriers find it challenging to offer net-30-day terms to their shippers. They don’t have the financial reserves to handle pick-up and delivery expenses and wait 30 days to get paid. Consequently, these carriers must turn away some loads. Factoring allows you to take on new shippers on net-30 terms with confidence. You will be able to finance their invoices upon delivery of the load, and get paid promptly by the factor.

Benefit #3: More reliable than quick pays

Getting quick pays from a shipper is great for your cash flow. Unfortunately, quick pays aren’t always reliable. Shippers only offer to quick pay when it’s to their advantage. They use them when they have the cash flow to take advantage of the early pay discount. However, shippers may limit or take away quick pays if they have cash flow problems or during tough economic times. Factoring your invoices provides more reliable cash flow than quick pays. Factoring companies will finance your invoices as long as the invoice and your company meet the funding criteria.

Benefit #4: Less bad debt and better-paying shippers

As part of their service, a factoring company checks the commercial credit of your shippers and brokers. This service helps you pick better clients as you only offer 30-day terms to clients with a good payment record. Shippers with a negative payment history can be asked to pay up front or avoided altogether. Following this strategy has two important outcomes. First, it improves your cash flow and minimizes the time that you spend on collections. Second, it reduces the chances of hauling a load for a shipper that could default on payment. This reduces your chances of getting bad debt.

Benefit #5: Grows as you need it

Most factoring lines have a credit limit tied to your company’s revenues and capabilities. The line is flexible and can easily be increased to accommodate growth as you add shippers and drivers. Most line increases are evaluated and processed in one business day.

Benefit #6: It’s easy to get

Qualifying for a factoring program is easier and simpler than getting a conventional business loan. In general, your invoices must be free of liens. The factoring company can verify this in most provinces through a PPSA search. The only exception is Quebec, which has a different process. Other than that, your shippers and brokers must have good commercial credit, and your business must not have a serious issue.

Benefit #7: No long-term contracts

Most freight bill factoring lines don’t require a long-term contract. Instead, you can use the line as needed for a short period. This is an important benefit because it helps you lower your financing costs. Note that sometimes, a factoring company will ask for a longer-term contract. This usually happens in special situations, such as a company going through major challenges, a restructuring, or a negotiated discount.

Benefit #8: You can get it quickly

Most factoring lines can be underwritten and deployed in days. This makes it an ideal option for carriers that have immediate cash flow needs. Note that quick funding can happen only if the factor gets all the proper documentation quickly and if they are able to set up the accounts and verify freight bills in a timely manner.

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We are a leading freight bill factoring company and can provide competitive terms. For more information, get an online quote or call (877) 300 3258.