Last updated on August 9th, 2020 at 03:49 pm
If you’re running a business in the construction, transportation, or freight, then you’ve probably come across something called trucking factoring. One of the most crucial aspects of a small business is making sure you have cash flow, especially when starting, as the first few years are crucial to business growth.
Factoring helps improve cash flow by speeding up the payment process. Many times, businesses must wait anywhere from 30-90 days to be paid for work, but with trucking factoring, you and your business can receive payment in as little as 24 hours.
But what are some other reasons you should use factoring for your business?
To grow your business, you need steady cash flow. To grow your business quicker and more efficiently, you would need cash as soon as possible, right?
With factoring, you’re going to be able to receive the money for your services quicker and put that money back into your business at a faster rate.
Money comes in quicker, and you can find ways to use it to improve your business quickly as well. You can hire more drivers for your business without having to worry about a lack of cash.
No Debt Involved
Many businesses, rightfully so, check out loans to get help to get off the ground or grow. Firstly, loans can take a long time to be approved, especially if you’re going through a bank. Other times, you can be hit with high-interest rates.
With factoring, you’re going to be paid for your job in advance with just a small fee being taken out. That way, you don’t have to pay anything back because you already “paid your debt” with the fee being taken out in the first place.
It Helps Track Invoices
When you’re running around for numerous jobs, making invoices and keeping receipts is something that’s equally important and tedious. Then, you need to make sure that your clients are actually following up, and if they’re slow to pay, that just adds another thing to your list of things to do.
With the quick payment time of factoring, you’re not going to have to worry about tracking all those invoices and constantly following up with people. Factoring will keep an eye on them automatically, saving you plenty of time and stress.
There Are Different Options
With factoring, you’re going to find two different options: recourse and non-recourse. Both of them have their own sets of advantages and disadvantages.
Non-recourse factoring means that the factoring company takes on all the credit risks for invoice collection. Recourse is just the opposite, as you are the one responsible for the invoice risks.
Recourse factoring is less expensive, and if a customer were to default, you aren’t going to have to pay the debt out of your pocket. There is no perfect option for everyone, but it’s important to find a factoring company that offers both kinds of factoring.
A Convenient Option For Those Who Have Poor Credit
When looking at private loan companies or banks for loans, they’re often going to be looking at your credit report. A poor credit score means that you’re going to be out of luck when it comes to securing a loan.
With factoring companies, you’re not going to have to worry about your credit much, as factoring companies look more at your company’s quality instead of the credit report.