Top 5 Best Factoring Companies for Trucking Industry
Factoring has come as a boon to small and medium size businesses. The factoring option provides business an opportunity to grow with a very improved cash flow. It gives you an opportunity to convert your outstanding invoices into cash. When you are on the lookout for the factoring company that would be beneficial to you, you need to be careful and undertake research of at least a few factoring companies. Sometimes you will find the factoring scheme provided by some better than other while sometimes what may matter may only be the factoring fee.
Is the factoring company specialized for your industry?
The factoring company that you select should be specialized or at least possess a relevant amount of experience in your industry. For example, if you are in need of finance for your trucking business, a factoring company who is specialized in the Truck Factoring industry can be beneficial. The factoring company will be familiar with most of the freight brokers and shippers that you are dealing with. If they were aware of these customers, you would save time and money on the credit reports of such customers.
Does The Factoring Company Have A Credit Department?
It is beneficial if the factoring company has a separate credit department. They can assist you in getting good invoice factor options. They can to concentrate on giving you good credit limits but within safety levels. A company without a credit department may not provide you with the sufficient amount of credit, which may be a hindrance in your steady growth.
Does Your Factoring Company Have A Collections Department?
A factoring company with a collection department can be highly useful. With a fully staffed collection department, your entire collection task will be taken care of diligently. Rather than having an account executive doing the collection duties of a specialized collection agent, your customer collection will become a smooth process. They may even be able to advise you on the customer with good payment track records.
The Track Record Of The Factoring Company
A factoring company that has been in the factoring industry for more than 10 years can be highly beneficial, as they have had experiences of dealing with all sorts of situations. They may be able to give you good options to ensure that your customers’ payments are timely. They would be in a good position to advise you on the selection of your customers. To ensure that your factor has a proven track record, you can get references from them, whom you may contact for a feedback.
The Size Of The Factoring Company
Though the size of the company does not matter much, it is advisable to find a medium sized factoring company. You will benefit from the experience that they have in this sector and being of a limited size, they would be able to offer you good personalized services as well. You can also benefit if these factoring companies give you the opportunity of meeting the top management of existing clients and new ones. They can give your business the very stability that is needed to overcome difficult situations, and be advantageous to the growth of your business.
While selecting a factoring company, you may also wish to examine whether they are technologically up-to-date. Most of these companies will provide you the option of communication via the Internet as well through other technologies. It is up to you to consider the various factors when selecting the appropriate factoring company, which would help your business.
Top 5 Best Factoring Companies for Trucking Industry:
Freight Factoring Get Cash Fast – Get Approved in Minutes, 99.9% Approval Rate! Call 1-855-790-0906 Now for Quick Funding.
Apex Capital provides freight factoring services for trucking companies, authority services to start a trucking company, fleet fuel cards, & a free load board.
We specialize in flexible freight factoring services for truckers. Factor your freight bills with no minimums or long term contracts.
Let TBS improve your cash flow by paying you for your invoice immediately. TBS makes factoring easy. We offer recourse and non-recourse freight bill factoring programs to benefit any size company. Let TBS, the number one truck factor, help you stay on the road to greater success.
Carter Funding Corporation has been providing Business Factoring solutions for clients since 1994 with simple answers to their cash flow needs.
How Factoring Companies Help You To Succeed
Small and medium businesses usually have a very tough job managing cash flow. Generally, if you are selling your products and services to other big businesses or government agencies their payment period may range between 45 to 60 days. During this period, however, these businesses have regular expenses to take care of, like monthly rents, salaries and bills. The scenario is that of non-receipt of payments from the customers and having to make these payments by a given date when the cash flow is in a tricky state.
A big business may be able to sustain but the smaller ones find it very hard. Moreover, when it comes to planning and getting new contracts there is mostly an immediate requirement of cash. If this amount is not available, there is every possibility of losing a new business opportunity. The solution to sort these problems is either applying for a bank loan or applying for invoice factoring. A bank loan is hard to get for the small business as they have not yet proven themselves and do not have many assets to show as collateral. Therefore, the next best thing to happen to these businesses is the invoice factoring option that many other financial institutions provide.
When you approach these Factoring Companies the asset that you have in hand are the receivable invoices. Factoring companies will buy these invoices from you. They will make you a payment, in some cases even up to 90% of the invoice value. This helps in situations where you need immediate cash to take advantage of a good business opportunity. The process of factoring companies sanctioning your loan may take two to four days. Thus, you get some immediate cash, which you require so urgently. You may even be able to bid for and bag a big order. This means an improvement in your sales thus improving cash flows as well. Your profit margins improve with improved sales and cash flow. You can even make a few purchases at good discounts.
Another benefit that you get is once the Factoring Companies buy the invoices they would take care of the collection part of your business. They will follow up with the customer for the timely payments. You also get detailed reports of the payments received and the accounts receivables. The remaining amount will be given to you once the payment is received from the customer and the factoring fees are deducted from the amount. The cost of factoring is dependent upon the creditworthiness of your customer, your monthly factored volumes and the period of the invoices factored. If you have gross profit margins above 15 percent, you can benefit from the factoring schemes.
Invoice factoring is a boon to all businesses, including Truck and Freight Factoring. With the timely finance they provide, you can concentrate on growing your business. As sales increase, invoices increase, which means you can have more invoices for factoring. With the improved cash flow, your cash needs are taken care of and you can work hard towards the growth of your business. It can also bring in stability as well as help you to sustain your growth over a period.
Use Invoice Factoring To En-cash Your Credit Invoices
If your business necessitates the regular issue of credit invoices to your clients, then you will soon realize that a lot of money is locked up. By using invoice factoring, you can free up that locked cash and get instant funds against those credit invoices.
Invoice factoring is a method used by Factoring Companies to ‘buy’ your credit invoices and offer you instant money. They will pay you 80 to 90 percent of the invoice value and often almost the entire invoice amount within a day or two. The balance amount, if any, will be paid to you on the due date of that invoice when your client pays the factoring company the invoice amount. The invoice factoring company will retain from 1% to 5% of the invoice value as their factoring fee. This fee will depend on different factors such as the credit period, the creditworthiness of your clients as decided by the factoring company and the total volume of business you generate for your factoring company. Therefore, if your clients are financially healthy and credit ranges from 30 to 60 days, you can get the best rates for your credit invoices. Nevertheless, if you have offered credit of around 90 days and your clients have a poor credit rating then the factoring fees will be on the higher side.
The advantages this system offers are immense. The biggest is that you get ready cash even though your invoices are issued on credit terms. This means that you can now meet your daily expenses immediately without worrying about whether your clients will pay the amount of the invoice on the due date. Your cash flow will improve immediately. You will also be able to plan any expansion that you might have in mind. Ready cash means that you can now buy some of your products in bulk and take advantage of bulk discounts or cash discounts. In the case of Truck Factoring, this helps with cash flow that is used to pay wages, buy fuel and general trucking equipment.
Banks too can offer you ready cash in the form of a loan but the problem with banks adopting a strict stance due to the credit crunch; you will now be forced to arrange for substantial collateral against the loan amount. You will also need to submit all your financial documents for the previous 3 years. Apart from that, you will anyway need to still pay interest on that loan in the form of regular monthly installments. In case you realize that you require some more money, then it would be very difficult to approach the bank for more money if you have not yet cleared the old loan. Thus banks can prove to be rigid suppliers of cash, whereas invoice factoring is more flexible and will grow along with your business since the more you sell on credit, the higher the amount, which your Factoring Company can give you against those invoices.
So, anyway you look at it, an invoice factoring company can provide you with an opportunity to en-cash your credit invoices with the least amount of hassle as compared to any other means of finance. This method of financing also grows along with your business and hence offers a smooth method of ensuring that your cash flow does not run into any bottlenecks.
The Pros And Cons Of Invoice Factoring
Every business requires money to fuel its expenses, salary payments and for future growth. If you too are supplying regularly to credit clients then the need for ready money would be much more acute and this is where invoice factoring could bail you out. However, there are some pros and cons, which need to be considered before you blindly jump onto the factoring bandwagon.
In invoice factoring, a Factoring Company will purchase the credit invoices that you have drawn in your clients names. The company will then remit the invoice amount after deducting their factoring fee from that amount directly into your account within a span of 24 to 48 hours. This means that you get almost the entire amount of your invoice within 2 days instead of waiting for 30, 60 or 90 days that you may have specified in your invoice. The factoring fee will depend on various factors such as the credit period given to your client, the credit worthiness of your client as per the factoring company’s eyes and the total value of your credit invoices that you submit to your company. These fees range from 1% to 5% per month.
There are several pros in going in for such a financing method. The most obvious advantage is an instant improvement in your cash flow. This will enable you to attend to your daily expenses and pay off staff salaries. This will also enable you to go in for accepting larger orders, which would not have been possible in previous times. You could also go in for bulk quantity purchases or cash purchases of your products and avail of special discounts. This will lower your purchase costs and increase your profit margin. This method is also simpler and faster than availing a bank loan, where the documentation could be extensive and you would need some collateral against the loan. In invoice factoring, the credit worthiness of your clients is more important than your own. If you have just started your business, then invoice factoring will be much easier to avail than a loan and this mode of finance will also keep up with the growing needs of your growing business since the more credit invoices you submit, the greater the amount that you receive from your factoring company. Many factoring companies also take over the entire responsibility of payment collection from you and this would free you from the daily stress of running after your clients for money.
There are also some drawbacks to this method of finance that need to be understood. Firstly, if your credit period to is too high, or if your client’s credit rating is low in the eyes of the factoring company, then the factoring fees could be quite high as compared to a bank loan. Your clients too, might not be very comfortable if the collection is handled by a ‘third party’. The factoring company’s staff too might end up offending some of your clients if they pursue the payments aggressively. The factoring company might also not be able to handle your increasing business and might start defaulting on the payments to be made to you. If your profit margins are already very low, then going in for invoice factoring might be of no use.
So, think about the pros and cons of Invoice Factoring before deciding on whether it suits your business style and whether you can afford the fees charged by these companies.
What Makes A Business Suitable For Factoring?
If you are small or medium sized business, you are often faced with a very typical situation where you have money due from your customers. These businesses will be paying you the amounts only after 45 to 60 days. However, you also have your own set of payments to make at certain dates, like salaries, bills to be paid, and rents to clear.
For these payments, the money that your business requires may not be readily available at hand or from your bank especially when large amounts are due. Moreover, if your business approaches the banks for finance the probability of getting a good loan is less, as your business has no proven standing yet in the industry. As your company is small or medium sized, you do not have the necessary credit ratings built up over a period. You are yet to prove yourself a good business proposition for the banks. They may not be ready to risk giving you loan incase you default on the payments. This proves to be a very difficult scenario for you. For your business to grow you need finance and to get finance you need to be a big business. There are tricky situations where you may not be able to grab some big contracts because you do not have the finances in hand to show. This is an excellent opportunity lost. In such a situation accounts receivable factoring provides you a good option for financing your business needs.
How Truck Factoring Works
When you need working capital for running your business operations and are unable to get finance from a bank, it comes as a relief that you are eligible for financing from factoring companies. What you have is some good asset like the invoices, which are receivable from your customers. The factoring companies will provide you with finance against the invoices that they buy from you. You need to remember though that the creditworthiness of your customer is very important when you are considering the factoring option. If your customer has a good credit record then you will get finance at a good rate. Generally, if you have contracts from government institutions or big business you will get a decent rate. You may get up to even 90% of the invoice value. This is simple, since a customer with a good credit standing will pay the amount due on the stipulated date. The company does not stand to lose anything. Depending upon what type of factoring, recourse or non-recourse option you have you will be responsible to pay if the customer does not pay.
With factoring, the finances are timely when you have urgent need for the money. This is helpful for you to keep the momentum going when you are growing at a good rate. Improved cash flow means chances to get new projects improves. New projects means new invoices for further finance needs. If you have a good record with your initial invoice factoring, you will find that the Factoring Companies are ready to give you good financing options.
All those businesses that need finance urgently and are unable to get it from banks as well as have late paying customers; invoice factoring is a good option.
Recourse Factoring And Non-Recourse Factoring
Factoring is highly beneficial to small and medium scale organizations. These organizations need constant cash to take care of their daily needs, and for purchases. These businesses usually have some big customers or government organizations that make the payments mostly after about 45 to 60 days. With this their cash flow gets affected. There are always those bills, monthly rentals and salaries that have to be paid. With the lack of such ready cash, the companies may miss getting bigger contracts. So how will the cash flow improve?
What you have in hand though is the invoices which are receivable after a certain number of days. These very valuable assets bring in good money. Factoring Companies help you in your times of need. They buy your invoices and give you of up 90% of your invoice value. They do the collection of dues on the stipulated dates. Generally, you can choose, depending on your needs, from two types of factoring, recourse factoring and non-recourse factoring.
Recourse factoring: The factoring of invoice involves the factoring company doing the collection job of your invoice that they have bought. When the money is given to you against your invoice, you receive a certain percentage after the money has been received from your debtor. The Factoring Company deducts a factoring fee, which is a percentage of the total amount due. In case you have opted for recourse financing, in a scenario where the debtor fails to make payment, you are responsible to make the future payment of the invoice. In short, in recourse financing the factoring company will not risk running bad debts. They will claim the money from you if your customer does not pay up. There will be some time given to you to make the payment. It is your responsibility to recover the amount due from your customer. Whether or not you are able to recover your dues, you are bound to make the payment due to the factoring company. Recourse factoring is cheaper than non-recourse and there are fewer restrictions regarding your customers and your systems.
Non-recourse factoring: Non-recourse factoring is also an option. In this case, unlike the recourse factoring the financing company assumes the risk of bad debt. This means that if your debtor fails to pay the amount on the due dates you are not responsible to make the payments. Your only liability is to pay the factoring fees to the factoring company. The risk that the factoring company takes certainly makes it more expensive than recourse factoring. The risk undertaken is that of total disappearance but not for slow payments. Though you need not pay the amount due, you are required to pay the interest amount that has been agreed upon in the contract. All the rights for collection are with the factor even taking legal action
Both of the factoring options are popular with the people. The factoring companies may undertake only one of it also. Providing both types is also a good option for these companies to cater to all types of customers including Truck Factoring. It is up to you to decide what suits your requirements the best.
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