If you’re a veteran trucker, or already looking at cash flow solutions for your business, you’re likely familiar with freight bill factoring which means you’re ahead of the curve. This factoring primer is for the new owner-operator, or business owner who’s either boot-strapped the business to this point, or whittling away at a bank loan taken out for operating capital.
First things first: what is freight bill factoring? It’s an advance on the receivables from freight you just delivered but have yet to collect on from the customer. In short, it’s your cash in your pocket, before the customer is obligated to pay. You may be wondering, “if it’s my receivables I’m billing for, how does this help float or grow my business?” Great question, and while there are numerous ways, we’re going to focus on 4 main points.
It’s Faster Than A Loan.
Do you find yourself wearing more hats than you can count? It’s not surprising—most entrepreneurs running lean organizations find themselves handling everything from vision to operations to sweeping the floors, while the business gains momentum. Forecasting and budgeting can be a challenge for both start-ups and growing businesses, so often times we find ourselves needing capital late in the game, and a bank loan will take weeks to secure. Freight bill factoring can take hours to a few days to set up, is less intrusive with credit history, and available as soon as you need it.
Factoring Can Help Grow Your Business.
Business is going well enough you’re not forced to inject capital for operational expenses, however as new clients come in, cash flow becomes tight, as the need for new drivers, fuel, and truck maintenance increases. Cash flow is key for smooth operations, and absolutely vital for growth. Rather than have a cash infusion from a loan bearing interest month after month during loan repayment, factoring freight bills allows you to use your own A/R to front the capital, at a low rate, avoiding compounding interest.
Factor Invoices When You Need It.
You’re not locked in to factoring invoices each month. Once the relationship is established, factor invoices when you need the capital to cover costs or make an investment ahead of your receivables. It’s a cash advance only when you need it.
Some Factors Offer Back-Office Services.
If you’re an owner-operator or a small fleet, you’re typically wearing multiple hats and the last part of your day or week is spent working on A/R and A/P. A good freight bill factor will help you reduce your load and make you look polished in front of your clients with exceptional back office services. It’s the back office panache of a 100-unit fleet from a 3-4 unit operator.