Invoice factoring gives freight and courier businesses the opportunity to retrieve payment for their services fast. It has become an increasingly popular financing option for those whose customers can take anywhere from 30-90 days to pay outstanding invoices. While factoring companies do take a percentage of the invoice price, many trucking enterprises view this to be a worthwhile investment for the following reasons:
Increased Cash Flow
To be successful as a business, there should be enough money in the bank to pay employees, pay the bills, order repairs, and ensure your operating costs are covered. This is difficult to do when every time you perform a service, you’re constantly waiting for funds to come in. Factoring offers clients a bit more breathing room, not to mention access to their well-earned cash when they need it most.
Unlike the interest rates that accumulate when businesses take out loans from the bank, invoice factoring is often executed for a minor, one-time fee. If you stop by Accutrac Capital you can see what kind of plans are available based on carrier needs; for example, flat factoring is done for a small percentage of the invoice (starting from 1.59%). In return clients immediately receive 97% of their funds (less the fee), and the remainder upon their customers’ payment. Flexible factoring is also available for clients with dependable customers at a rate of 0.49% for 10 days, and a factoring line of credit can be set up for fast growing enterprises starting at 0.022% per day.
Chasing after customers can drain a trucking company’s energy as well as their resources. Partnering with a factoring entity however will alleviate the need for liaising with customers about outstanding invoices, as part of the factoring company’s service is to provide AR management. This gives businesses more headspace for working on future endeavours rather than stressing over past initiatives.
Opportunities For Growth
Many factoring companies offer their clients extra services that will help with their growth. These include cash advances on the value of their loads, discounted fuel, and discounts on currency exchanges for cross-border operations. They’ll even offer equipment financing for those who want to expand their fleets by adding new vehicles or replacing existing ones with new models.
Startup Friendly Alternative
Very few banks will approve startups for business loans. Often, they’ll require them to have a credit score they’ve not yet had enough time to develop, and excellent history of cash flow their customers have made difficult to achieve. Startup businesses often also lack the collateral or business assets the bank is looking for in case a loan isn’t paid back. What’s more is that banks will often approve the companies who have the capacity to take out larger loans first as it promises them greater returns.
For businesses that cannot acquire financing using traditional methods, or find it is not an economically viable solution, invoice factoring will give them the stability they need. It will also prevent complications from arising regarding interest rates and owing money to financial giants.