It is something that they would never obtain through traditional finance. It helps the trucking company immensely in times of financial difficulties as they get immediate access to funds. There is no stress about possessing excellent credit scores or orderly business financial statements. The advantage of this financial arrangement is that the focus is on the customer’s creditworthiness instead of the freight business. They can use fuel cards, which may also come with bonuses like repair discounts, fuel advances, and further fuel savings, to channel some of the money. Therefore, in addition to improving cash flow, they provide incentives like fuel discount cards to help trucking companies cover operating costs. Truck factoring firms are aware of the value of liquidity in day-to-day operations. Increases Cash Flow And Offers Chances To Save Money The ability of the customers to make on-time payments determines whether the factoring arrangement will succeed rather than the reputation of the business owner. Truck factoring companies offer the benefit of acquiring working capital for your business, which otherwise would have been difficult to obtain from traditional lending companies. Benefits of Truck Factoring Working Capital The only qualified grounds in non-recourse factoring are closure or bankruptcy, which must happen during the factoring period, i.e., typically the first 90 days after purchasing the invoice. In non-recourse factoring, you need not pay back the invoice amount if an invoice is passed late and the client fails to pay for a legitimate reason like bankruptcy. You need not make payment in cash instead, you may agree to have the outstanding invoice replaced with a new one of acceptable value or request that the factoring company deduct reserves. In recourse factoring, if your client fails to pay the invoice that includes the cash advance and any additional fees, you will be liable for the same. Types Of Factoring Service Recourse Factoring It will ensure that your weekly and monthly expenses are met without taking a bank overdraft, using your credit card, or out-of-pocket expenses. The trucking company can improve its cash flow by offering its accounts receivable to a third-party funding source at a discount. There is a considerable lag of greater than 45 days till your payment is realized. However, it is significant to understand the difference between the time you get the invoice and get paid. Your profit is the total of your payment, less the expenses incurred, in delivering the cargo. The freight industry operates by picking up and delivering goods from one location to another and getting paid by the shipper or broker. Increases Cash Flow And Offers Chances To Save MoneyĬost factoring is also known as freight factoring in the trucking industry.
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