Freight bill factoring and Load factoring

Working as a transport company can be a lucrative option but the biggest problem with it is the slow paying client which hampers the cash flow system. The client doesn’t pay for over a month or two which causes financial constraint to the company. But you cannot wait for that longer because you need capital to buy fuel, pay salaries, buy material, and perform repairs if needed. At that time, you need a financial resource. This is why the companies resort to the Freight bill factoring

Freight invoice factoring is a financing option that allows the trucking companies to finance their open freight invoices that have a gradual payment mode. In this factoring, an immediate amount of working fund is paid to the company to operate their business, while the factoring person keep the bill with him.

There are two types of freight Factoring services - recourse and non-recourse. In a recourse transaction, the factoring company will return your bill if the same is not paid in 90 days. In a non-recourse transaction, which is more expensive, factoring company bears the loss if your client goes bankrupt. 

How the transaction happens?

One of the most widely practiced way for Freight bill factoring is that freight bill is financed in a couple of installments. In the first installment, most of the amount of the freight bill is paid at the time of delivering the load and billing. The second installment is provided when the company gets the complete payment from the client. 

However, if the invoice is not too much, then you can also go for single installment transactions. It may be a little more expensive proposition for you.  

How much does it cost?

The fees of the Invoice factoring depend on the volume of your sales, the length of the transaction, and credit-worthiness of your shipper. On an average, the fees can be anywhere between 1% to 3% per month. Some clauses can be kept flexible to meet your demands and needs. 

Other than the quick financing, the Freight bill factoring also offers other services such as fuel cards and fuel advances which helps better the cash flow and permits you to have better fund with you.

Who can avail the Freight bill factoring? 

The eligibility criterion of the Load factoring is that you must be a carrier or a broker, you must possess all the required documents and licenses, and you must work only with the creditworthy shippers. 

Why Freight bill factoring is beneficial?

·         It allows you to have an increased funds, a better cash flow, and you can take more loads.

·         With money in hand, you can think about expanding your business

·         Since the factoring companies check the creditworthiness of your shippers, you have quality clients.