Whether your freight business is running low on cash or facing an urgent expense, it can be difficult to find urgent loans and financing opportunities that don’t cost a fortune.
While payday loans are available on short notice, their interest rates definitely break the bank. On the other hand, business loans are affordable, but take weeks to get processed if they have a chance to get approved at all.
This makes it difficult for your freight business to nab affordable and timely financing opportunities. But even at being a daunting feat, finding accessible and swift funding is not an impossible task.
Through freight bill factoring, your freight business can sell its bills of lading (BOLs) for their cash value. This allows you to get instant cash on your unpaid invoices, and lets you fulfill your financial needs without getting under a huge burden.
To see how BOL factoring works and how it can help, here’s an overview of the process and its associated aspects.
What is Freight Bill Factoring?
Freight invoice factoring or freight BOL factoring refers to the process of selling your accounts receivable (AR) for cash payments. When you opt for the process, your unpaid invoices are bought by a factoring company.
This factoring company, also known as a factor, immediately provides you with a majority of your invoice’s total cash value. But the company recovers its own investment in the unpaid invoice when the client settles the BOL by its due date.
The factoring company typically provides you with upfront payments of 70-90 percent of your total BOL value. The rest is delivered after the end client has settled their invoice in full. With that being said, the factor does charge a fee for its solutions. This fee is usually nominal, especially considering the swift disbursement of funds that invoice factoring brings to the table.
This process makes sure that you can turn your unpaid invoices into quick cash without bothering your clients. As a result, you can instantly bridge the gap between your business’ needs and its future invoice settlements.
How Can Factoring Help My Freight Business?
Factoring can help your freight business through multiple aspects that range from critical expenses to urgent needs. This makes sure that your business not only makes its way through day to day expenditure, but also benefits from growth opportunities whenever possible.
The areas where freight bill factoring can help your business include but are not limited to the following.
Maintaining Fleet Condition
Whenever you are running a freight management business, one of your top priorities is to maintain your fleet’s condition. From taking care of scheduled inspections to handling required repairs, you need to manage a number of aspects under this one task.
Meeting these requirements isn’t cheap to say the least, which is why it can get difficult to keep funding these practices out of pocket. By turning to a factoring company, you can ensure to get instant cash against your invoice and continue following these critical steps. In addition to preventing unwanted mechanical issues, this also keeps your drivers, crew, and trucks safe on the road.
Doing Urgent Vehicle Repairs
Whether it is an unfortunate accident or abrupt technical failure, sudden issues can render your trucks unusable. Until you take proper steps to repair these problems, you are unable to use the respective vehicle to generate any type of revenue. But since you cannot take a broken truck on the road, doing so seems impossible to begin with.
To get yourself out of this catch-22 situation, you can opt for freight bill factoring. This makes sure that you are able to leverage your unpaid BOL in order to get the funds you need. As a result, you don’t have to keep waiting until your invoice’s due date for the truck to work again.
Ensuring Timely Payroll Disbursement
Similar to any other business, a freight management company also has employees to pay. If you run a medium-sized operation, this expense can reach quite a significant amount of money. While funding the payroll can be possible through your business’ savings, that is not always the case.
In such situations, factoring your invoices can make sure that you save your business and your employees from running into an uncertain situation. By getting cash value on your accounts receivable, you can get the capital you need to continue running your operations smoothly. This ensures that your employees keep their relationship intact with your company, and you can continue generating new business without shedding your workforce.
Managing Utilities and Property Expenses
Indeed, managing your utilities and your property expenses can be a bit of a burden. This aspect is quite certainly true in a normal economic situation but can be so in an economic downturn as well. Of course, you can always look at managing your utilities and your property expenses by taking it out of your regular business savings. But you may want to allocate those savings for other aspects of business.
In these situations, it is best to turn to factoring your invoices to make sure that you optimize your cash flows and have cash building up for emergency situations while also staying on track of your current expenses. Thankfully, this mode of financing enables you to process your accounts receivable, obtain the right capital, and move along to general business matters with ease. This ensures that you continue to keep your business running smoothly with utilities and properties without incurring liens or other issues due to missed payments.
Making Insurance Payments
Insurance is a critical part of your freight business. It helps to keep you covered and keeps you in good hands. Further, it contributes to risk minimization and lets you focus on the points in business that matters.
When you have insurance, you can ensure that more of your potential liabilities can be taken care of by your insurance company. You know that you do not have to fear risks but can take the necessary steps to stay in line with proper due diligence aspects.
Business insurance is helpful in several ways. It helps you minimize your stress, shaves off time that you may allot for liabilities, and it can save you a tremendous amount of money over the long haul. Further, potential damages and issues are bound to occur in the freight industry, whether it was your company’s fault or not. That is why having insurance lets you sleep soundly, knowing that you will have your insurance coverage on your side. Finally, the right insurance helps you provide further benefits to your stakeholders, such as your employees.
But it all comes at a cost to your business. Indeed, insurance does not come cheap. That is why you can take advantage of invoice factoring to ensure that you are able to keep your coverage and continue running your business efficiently.
Handling Drivers’ Needs on the Road
Handling drivers’ needs on the road are quite essential. You must always ensure that your business keeps on trucking along, no matter what happens. But the truth is that potential issues that may arise on the road may not be cost-effective; they may require more out of your company’s cash reserves.
But you do not have to worry about cash flow issues if you are able to ensure invoice factoring for your various needs.
Invoice factoring enables you to have funds in advance and helps you take care of your needs at the present moment. You do not have to worry about a stoppage in work, potential delays in delivery, and other aspects, and can merely take care of present issues and ensure reliability.
Indeed, having the ability to take care of your customers and your employees is certainly quite a benefit and makes a significant difference.
How Does Invoice Factoring Work for Freight Companies?
The fact is that your trucking company will invoice customers and bide your time for a while before obtaining payment. Sometimes, your clients may pay on time; at other times, they may not and will take some time. But the truth is that you still have bills to pay in the meantime. What should you do to keep your business moving?
You can turn to unpaid invoices to get funding on that invoice. You turn over your invoices to a third party and obtain funding now. Then the funds from those invoices go to the third-party financier, and you stay afloat.
Most invoice factoring companies would want to ensure that invoices will be paid in ninety days. They will also want you to show that you meet a certain standard of credit and will want you to present moderate to high volumes of invoices.
Are There Different Types of Factoring?
Sure, there are different types of factoring. These include the ones present below:
- Recourse Factoring
- Non-recourse Factoring
- Non-notification Factoring
Recourse factoring is where the company necessitates you to purchase the invoices that they could not collect on.
Non-recourse factoring is where you are not liable for customers who don’t end up paying their invoices. Of course, these companies would like to have a higher caliber of clients and end clients.
Non-notification Factoring is where the factoring company is less intrusive in the overall collections operations. For instance, traditional factoring companies may notify customers that they are involved in collecting and may be more intrusive. But non-notification factoring makes it to where you interface with your clients and the factoring company steps in if there’s significant issues.
Factoring is Beneficial in Many Ways
As you can see, factoring provides an immense amount of value for your business and many businesses across the world. It prioritizes cash flows and enables overall flexibility in many cases. As such, it serves a wide variety of industries and can be a boon to your company in the present or in the future.
An author of Namaste UI, published several articles focused on blogging, business, web design & development, e-commerce, finance, health, lifestyle, marketing, social media, SEO, travel.
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