When we talk about freight bill factoring we are referring to a form of business funding on which brokers and carriers are enabled to finance slow-paying freight bills.
To own a trucking company is not a simple thing. Payment usually occurs upon delivery, but the maintenance of the truck and drivers on the road costs money. The complexity of this situation increases when considering that some shippers take up to sixty days to release their payments. It seems almost impossible for your freight company to keep up with this and also grow at the same time. This is when freight invoice factoring comes as a perfect solution for your situation. In summary, this service finances your open freight bills and provides you with funding. It can work as a solid financial platform for your business to grow.
Factoring is sometimes considered by some people as a bit of a hassle, but the truth is that it is not, at all. It’s actually pretty simple and straightforward, and can result in huge benefits for your business. By using freight broker factoring services, you will get the exact amount of money that you need soon after you deliver the load to your client, instead of waiting up to 60 days for your client to finally pay. Besides, you will not need to borrow any money or use credit cards, so no worries about becoming in debt at all. This kind of cash flow will also allow you to do proper maintenance to your trucks, avoiding potential mechanical issues with them, at the same time end up costing even more money and headaches!
The most used method for freight invoice factoring consists of two different payments: the advance and the rebate. The first one (the advance) usually covers about 90% of the total amount of the freight bill and is given to you at the same moment on which you invoice the client and deliver the load. The second payment (the rebate) covers the remaining, minus the fee, and is given to you as soon as the client pays its invoice.
Of course, despite all of the benefits, this service isn’t for everyone. If you have lots of resources or for some other reason your business doesn’t need the cash for remaining sustainable, then you probably don’t need this kind of service that much. But knowing how most logistics and distribution companies operate and the urgency they tend to deal with, this kind of service is usually very helpful. Here is a link for you to fully understand freight invoice factoring in case you still have some doubts about how it works.
Requirements for freight invoice factoring:
Even though the requirements and approval processes are by no means the same as with banks, the factor needs to assured that your client is at least likely to pay. Some of the things that any freight bill factoring companies will ask you for getting started and work together are:
- To possess all the required documentation and licenses for the case.
- To be a real carrier or freight broker.
- To have all freight bills free of liens.
- To have creditworthy and reliable clients.
Things to consider for freight bill factoring:
These are some things that you will need to be aware of when looking for a factoring company for trucking:
- Fees: Normally, a fee of 3% to 5% of the total will be charged to you for the advance. This depends on the reliability of your customers and on the quickness on which they usually release payments.
- Documentation: You will need proper documentation at the moment of presenting a freight bill for factoring. The required documents vary depending on the factoring company.
- Reserve: At some occasions, the factor holds a reserve from the advance on the invoice. When this occurs, the factor will pay approximately 90% of the bill up front, which would be the advance. The remaining 10% is held as a reserve, just in case the invoice is finally not paid. If everything goes well and the invoice is paid, then the rest of the bill, minus the 3% to 5% fee mentioned above, is paid. So, for example, if you receive a bill for $2,000, the factor will pay you $1,800 as an advance, keeping the remaining $200 as a reserve. Now, let’s imagine that the customer pays the invoice (as expected), and that the fee that was arranged with the factor was 4%, making a total fee of $80. Then, after the client pays the invoice, you will receive $120 = $200 – $80 (reserve minus fee).
- Payment method: You need to determine which will be the method by which you will get paid by the factor. The usual methods are ACH transfer, wire transfer or check. Always consider the period on which funds will be available to you after payment: as you may know, sometimes it may take up to 48 hours before you actually see the money.
What options do I have for freight bill factoring?
There are many different freight factoring companies out there that can do this service for you. Carter Founding Corporation offers great flexible and quick logistic and distribution factoring solutions for you. This company has been in this market for a long time and fully understands the working capital that a distributor usually needs and the urgency on which they need to operate. Following your application, Carter Founding Corporation processes, verifies and approves the request in only 24 hours, and provides the fund within 3 business days. Here is the link for more detail on the logistics and distribution invoice factoring solution of Carter Founding Corporation.