If you own a trucking company, it’s highly possible that you experience some challenges with your cash flow. That’s because you have to deal with a whole lot of day-to-day issues. These include salaries for your employees, the cost of fuel and repairs, and other expenses. Nearly every trucking company offers a credit period for their clients, which is why commercial capital problems are inevitable. When your clients only pay after 30 to 60 days (and sometimes even 90 days), it’s no wonder you have trouble with expenses that need to be paid now.
Fortunately, there’s a solution that’s specifically designed for this situation, and it’s called freight factoring. In essence, the trucking company sells the invoice to a factoring company at a slight discount, and then gets a large percentage of the money immediately.
Freight factoring offers several advantages:
- It boosts your commercial capital. Your cash flow problems are gone because you’ve essentially taken out the waiting period. You now have money for whatever you need. You can pay your bills on time, and you can also use the money for growth and expansion.
- It’s faster than getting a loan from the bank. Banks are notoriously slow in granting loans, and it may take you weeks, sometimes even months for a loan to be granted. Your bills are due now, so obviously you need the money now—a fact that banks don’t seem to realize. But factoring companies understand such needs perfectly, which is why the money is transferred to you almost immediately.
- You can control your debt to equity ratio. This ratio rises when you take out a loan to solve your cash flow difficulties, and it is also monitored by investors and creditors.
- You can avoid payment collection troubles. Having to chase after clients for your own money can be tedious and annoying—and sometimes it can be terribly frustrating. The factoring company may take it upon themselves to do the collecting for you.
- You can cut down on extraneous staff. You no longer need to hire people to check that your clients have good credit ratings, and of course you also don’t need your people to make follow-ups or collect your payment.
- You lessen the risk you take with your client’s credit. Factoring companies may share information about the credit ratings of your customers, so you can assess which ones are good and bad credit risks.
In one survey, 935 trucking companies filed for bankruptcy in just the first quarter of 2008, and that only included the companies with at least five trucks in their fleet. If you don’t want your trucking company to join their ranks, you may want to consider a quick and reliable infusion of commercial capital, and you can get that with freight factoring.
For more information about our freight factoring services, please check out www.neebocapital.com.