What if we told you there was a quick and easy method to obtain cash flow and constant capital without having to wait for long-term bank loans and going through a lengthy approval process? Instead of needing long-awaited approval from a financial institution, using other financial methods to gain cash on the spot is a great way to keep your business afloat, pay employees, pay vendors, keep positive working relationships, and obtain new clients!
By researching alternative funding methods for your company, you can make sure your business doesn’t go into debt while paying its employees and vendors on time. If you are in the transportation business, you know how crucial it is to pay for services and products on time.
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Why should I use a truck factoring company?
Invoice factoring is a specific type of funding that requires less time for approval and interest rates to obtain. Instead of going to a bank and having them question the lucrative nature of your business and analyzing your creditworthiness, you can simply contact a trucking factoring company to make sure you can stay in business.
Trucking factoring companies will buy your unpaid invoices and pay you a cash advance based on the amount on the invoice. They will analyze your clients’ credit scores and reputation, ensuring they are reputable and can pay the debt back on time.
The truck factoring company will then use an advance of usually between 70 and 90%, based on your invoice client’s reputation and credit scores, and pay you within 24 hours of submitting the invoices. This allows you to obtain cash on hand and pay vendors, disgruntled employees and continue paying for daily expenses in the meantime.
Five Ways a truck Factoring Company will help your business succeed!
Along with the main reason why you should use a truck factoring company, there are various benefits as to why you should choose this funding method over other options like banks or personal loans.
Manage your cash flow
Cash flow is one of the most crucial aspects of any business – in any industry. You need constant capital and money to pay expenses and invest in new products, keeping your business afloat and changing with the times. This holds true especially for trucking companies, where they need to pay on the spot for many services.
If you wait the 30, 60, or 90-day waiting period to pay someone’s money, chances are they have already written off the idea of working with you again. If a long time passes between the delivery of products and the moment you collect payments, you will not have that invoice’s money to pay for daily expenses like fuel, repairs, and insurance.
Trucking factoring companies help solve this problem of waiting for overdue or long-standing invoices. If your client has 90 days to pay the invoice, they will often wait the entire period to pay their debt. During this period, you need cash to pay for the daily expenditures and overhead costs. This is where a truck factoring company helps you, providing you with immediate cash to continue running the business as usual.
Easy to obtain a loan
Unlike a bank loan with a lengthy approval process, you can obtain a loan from a truck factoring company in a brief period. Not to mention, if you don’t have a long-standing business, good reputation, or high credit score, you may find yourself out of luck when it comes to borrowing money from a financial institution.
However, you don’t need to have any of the criteria mentioned above to qualify for a loan with truck factoring. Instead, the truck factoring company will look at your clients’ credit scores and reputability to see if they will pay the invoice on time.
Manage your time and resources
Not only does truck factoring help you obtain a quick influx of cash with a very minimal approval process, but truck factoring companies also help you free up time and resources to help your business. Instead of focusing on getting cash to pay your employees and vendors, you can focus this time and energy on doing other things that will enhance the operations of your trucking company.
When you use a truck factoring company, you don’t have to stress about the collection process from your clients. In the past, you would have to use your own resources to act as debt collectors, hunt down your clients, and get the payment. However, with invoice factoring, they can do this process for you, ensuring your time and resources stay focused on your own company.
Flexibility is key
Like any business, flexibility is key to remaining productive and thinking on your feet. Using a truck factoring company, you don’t have to worry about planning meetings to get loans in person or provide enough documentation to your financial advisors. Instead, you will have a super-fast approval time and limits that can quickly increase to meet your business’s individual needs.
When you use a truck factoring company, you will have numerous flexibility benefits that you wouldn’t gain from a financial institution or bank loan. Some of the benefits include the short approval time, no deposit fees, monthly deals without a long-term contract, no minimum funding, no early termination fees, no fees if you don’t factor, and access to the person in charge of the truck factoring company to talk about anything that you would like to change.
If you leave a customer or client waiting for long periods, your reputation in the industry will suffer, leading you to not get new clients and prevent people from wanting to do business with you. To prevent this from happening to your transportation business, you can make sure you keep constant capital coming in to keep everyone happy.
Questions to ask a truck factoring company
Before you partner with a truck factoring company to obtain quick cash flow, there are some questions you can ask them to make sure you are the perfect fit for this new business venture.
How fast can my company secure funding?
If you want to obtain cash in less than a few days, make sure this truck factoring company can promise this. One of the best benefits of using truck factoring is the cash usually within 24 hours, so ensure the truck factoring company you want to work with can promise this time frame.
What is your factoring advance rate?
The cost of trucking factoring is affected by several variables, such as the business’ industry (trucking), the client’s reputability, client credit scores, your sales volume, business history, c capital income, and the alternative lending company you utilize for services.
For most industries, including the trucking industry, the advance rate will usually range between 80 and 95% of the unpaid invoice amount from your client. This number will be determined by the trustworthiness and creditworthiness of the client who needs to pay the invoice.
Between 80 and 95% are paid upfront, while the remaining is paid in full when the client pays the truck factoring company. Confirm the total number before you choose a truck factoring company.
What industries do you work with?
You don’t want to spend time and energy researching an invoice factoring business if you then find they cannot work with trucking companies. Find a truck factoring company in the transportation industry to ensure they know the specific nuisances of dealing with the trucking business.
Do you offer recourse and non-recourse funding?
Recourse and non-recourse funding are the two types of invoice factoring you can choose from when selecting a company. Recourse funding means that your business must pay for any unpaid invoices from a client. This is the most common type of invoice factoring but can lead to hefty prices if your clients deem it untrustworthy.
The other option is non-recourse factoring, which means the truck factoring company will pay any unpaid invoices from your client. Although this may seem like a better choice, it will often result in higher interest rates when you pay the company back in the future. However, for small businesses, this can help you get started and avoid paying client debt.
Do you need every invoice to be factored?
Make sure you ask this question before partnering with a truck factoring company. Some companies require every invoice to be factored, meaning they get paid every time, whereas others are more flexible. You may not want to factor every invoice, only choosing your slower-paying customers, but selecting the right truck factoring company can ensure this.
When choosing a truck factoring company that meets your specific needs, you need to ask the potential business partners questions to ensure you will be a good match. Furthermore, using a truck factoring company has been proven to help transportation businesses succeed due to the quick cash flow, easy approval process, flexible process, time management, and improved reputation in the industry.