invoice factoring
Kris Koonar asked:
If you own a truck company you must be fully aware that the intensity of cash flow in this business is much higher than most businesses. The list of ongoing expenses like fuel expenses, salaries, truck repairs, rental charges can be overwhelming for anybody. It is a known fact that running a truck company is profitable but the wait for freight bills to get paid after 60 days can be overbearing even for large profitable trucking companies. This situation is more difficult for small and new trucking companies.
In most cases, owners try to get finance from banks in the hope of solving the problem with a line of credits. But this is not easy as the company needs to show a minimum of 3 years of audited finances with regular profits. If that is the case then why would the owner go to a bank for a loan in the first place?
A better solution in such a case is to opt for freight factoring. In freight factoring you are able to convert your slow paying freight bills into easy cash by selling them to a freight factoring firm/company/broker. In this way you are able to get easy finances and handle ongoing expenses for your business. Freight bill factoring is a more flexible way of getting finances as compared to loans.
The process of freight bill factoring for trucking companies is easy. The factoring companies buy your invoices and pays for them upfront. The payment is done in two installments. The first installment, called the advance, of 90-95% of the bill amount is paid when they take over the invoice. The second installment comes when the customer has paid the invoice amount to the factoring company, who then pays the remaining 10% after deducting their fee. This 10% is held up as reserve money in case of charge backs or disputes.
The factoring fee is dependent upon the time taken to clear the invoice and the monthly volume of invoices provided to the factoring company. Discount rate can be from 1.5% to 4%per month depending upon the given parameters.
It is generally seen that factoring companies buy invoices by the non-recourse invoice factoring method. In such cases, it is the factoring company that carries the risk and bears the losses if a client is not able to pay the bills. This comes as an added benefit of factoring and allows you to concentrate on your business to make it grow.
In many cases factoring companies also provide collections and credit protections as part of their services. This saves you from spending more money and time in back office work and provides you with the benefit of concentrating your time and energy and redirecting your money to grow your business.
Freight bill factoring proves to be a boon for the new and emerging trucking companies as they can make their businesses grow without worrying about payments of invoices. Many truck factory owners started factoring their bills to avert dealing with slow or non payers, have with time been able to put away a lot of tension and concentrate in a more focused manner on their business.
For Commercial Finance Loans – Factoring Loans * Equipment Financing * Purchase Order Finance * Commercial Mortgage – IMM Financial has been in the Commercial Finance Business serving companies just like yours for over 14 years. Put our experience to work for you. We are the Cashflow Specialists.
If you own a truck company you must be fully aware that the intensity of cash flow in this business is much higher than most businesses. The list of ongoing expenses like fuel expenses, salaries, truck repairs, rental charges can be overwhelming for anybody. It is a known fact that running a truck company is profitable but the wait for freight bills to get paid after 60 days can be overbearing even for large profitable trucking companies. This situation is more difficult for small and new trucking companies.
In most cases, owners try to get finance from banks in the hope of solving the problem with a line of credits. But this is not easy as the company needs to show a minimum of 3 years of audited finances with regular profits. If that is the case then why would the owner go to a bank for a loan in the first place?
A better solution in such a case is to opt for freight factoring. In freight factoring you are able to convert your slow paying freight bills into easy cash by selling them to a freight factoring firm/company/broker. In this way you are able to get easy finances and handle ongoing expenses for your business. Freight bill factoring is a more flexible way of getting finances as compared to loans.
The process of freight bill factoring for trucking companies is easy. The factoring companies buy your invoices and pays for them upfront. The payment is done in two installments. The first installment, called the advance, of 90-95% of the bill amount is paid when they take over the invoice. The second installment comes when the customer has paid the invoice amount to the factoring company, who then pays the remaining 10% after deducting their fee. This 10% is held up as reserve money in case of charge backs or disputes.
The factoring fee is dependent upon the time taken to clear the invoice and the monthly volume of invoices provided to the factoring company. Discount rate can be from 1.5% to 4%per month depending upon the given parameters.
It is generally seen that factoring companies buy invoices by the non-recourse invoice factoring method. In such cases, it is the factoring company that carries the risk and bears the losses if a client is not able to pay the bills. This comes as an added benefit of factoring and allows you to concentrate on your business to make it grow.
In many cases factoring companies also provide collections and credit protections as part of their services. This saves you from spending more money and time in back office work and provides you with the benefit of concentrating your time and energy and redirecting your money to grow your business.
Freight bill factoring proves to be a boon for the new and emerging trucking companies as they can make their businesses grow without worrying about payments of invoices. Many truck factory owners started factoring their bills to avert dealing with slow or non payers, have with time been able to put away a lot of tension and concentrate in a more focused manner on their business.
For Commercial Finance Loans – Factoring Loans * Equipment Financing * Purchase Order Finance * Commercial Mortgage – IMM Financial has been in the Commercial Finance Business serving companies just like yours for over 14 years. Put our experience to work for you. We are the Cashflow Specialists.
