Trucking factoring benefits businesses by improving their cash flow; it is the process where large and small fleet owners sell invoices for a small fee to a factoring company to get paid for their outstanding invoices within 24 hours. Although trucking factoring has many advantages for a business, it also has some disadvantages. Continue reading to learn more about the pros and cons of trucking factoring.
Advantages of Trucking Factoring
Improved Productivity
By offloading collections and billings to a factoring business, you can focus on increasing your revenue by hauling more loads and handling other important business matters. Dealing with unpaid invoices and clients who delay payment can be hectic and time-consuming.
Having a factoring business take over billings and collections for your company can free up time so you can focus on growing your business.
“Efficient time management is key to a successful trucking business. With truck navigation on iOS, you can optimize your routes and with the help of trucking factoring, you can save even more time by leaving the collection and billing tasks to the experts.” – Dan Khasis, Founder of Route4Me
Faster Cash
One main benefit of partnering up with a freight factoring company is they allow you to get paid within 24 hours of submitting invoices. If you do not choose a factoring business to work with, you may end up waiting a couple of months before you get paid by clients, which can cause potential costs to accumulate and eventually lead to debt. In addition, factoring allows you to access cash to attend to your business needs. It can also create a consistent cash flow for your business.
Submitting Invoices Online
According to https://simplexgroup.net/factoring/, trucking factoring can handle your back-office work. Factoring companies allow you to submit your invoices online through an online portal rather than wasting time mailing them. You also get better accessibility; in most cases, you can submit the invoices 24/7. Another benefit is you have the option to factor in as many invoices as you require and choose what type of contract you want.
Credit Checks on Potential Customers
To avoid dealing with clients who refuse to pay, some factoring companies allow you to check whether a potential client is creditworthy before you work with them.
Disadvantages of Trucking Factoring
Higher Interest Rates
Depending on your agreement with the lender and their interest rates, freight factoring can be costly. There may also be fewer regulations on the rates, making freight factoring more expensive than other financing options.
Liability
If you are not certain about the repayment plan of your customers, freight factoring can be a risky step for your business. That is because if a customer fails to pay within the timeframe mentioned in your agreement with the lender, you can be liable to pay for the invoice. If you enter a non-recourse arrangement with the factoring business, you may not be liable to pay for the invoices. However, this type of arrangement can be more costly than recourse arrangements.