Whether you’re an individual trucker or a trucking company owner, it is always important to make sure that cash flow is steady. Trucking is a demanding job, with truckers working long hours. Costs like fuel, repairs, insurance, and payments, can accumulate and leave us in financially tight situations. Fortunately, factoring in trucking is a service that many use to alleviate financial stress and to grow their businesses.
Is There a Need For Freight Factoring?
Factoring for truckers is also known as freight factoring, and consists of individuals selling their invoices at a reduced cost in order to receive their money faster and increase cash flow when necessary. Instead of waiting weeks or even months for their payment, truckers can use factoring companies to bridge gaps in their income.
Traditional options such as loans and credit cards accumulate interest and can be devastating for small businesses or individual truckers. In addition to being interest-free, factoring in trucking provides a number of other advantages.
Advantages
Factoring for truckers has become a popular option for many reasons. Some of these are listed below.
Immediate Payment
Truckers and trucking companies no longer have to wait for months to receive their payment. Factoring allows them to skip this waiting period and have immediate access to their money. This usually takes about 24 hours, but some companies can transfer money to the client in less than an hour.
Financial Security
Those living from paycheck to paycheck, and struggling to stay afloat can rest assured that they can have peace of mind for a small fee.
Investment & Growth
Truckers can also invest in their businesses and expand since there is no interest, and money is readily available. Time otherwise spent on collecting money and keeping track of finances is also saved and can be spent working on other aspects of the business.
Easily Accessible
Unlike bank loans, which are not easily accessible for those with bad credit, many factoring companies are willing to take on the risk by performing credit checks on the clients’ customers, instead.
Additional Services
Some trucking factoring companies offer incentives such as fuel cards, large discounts on specific stops, and free credit checks after sign-up.
Disadvantages
No options are perfect – all come with their pros and cons. This also holds true for factoring companies.
Liability
If truckers choose recourse factoring, they are liable for the amount if their customers do not pay the factoring company. This can be avoided by choosing non-recourse factoring, where the company accepts the risk of non-payment. However, this is more expensive than recourse factoring and may be revoked in some instances.
Minimum Requirements
Some companies have minimum volume fees and application fees in addition to their regular price. Hidden costs may come up later, and companies may push people into long-term contracts. Be aware of the details of the deal.
Conclusion
Even if you decide that the pros of trucking factoring companies outweigh the cons, there may be hidden fees that you aren’t aware of or clauses in the contract that could negate the non-recourse option. To prevent this, it is necessary to use a company that you can trust. With so many options available on the market, the choices can be intimidating, especially when faced with legal jargon and overeager salespeople.
However, this does not have to be so difficult. There are experts who can guide you through this process, from vetting companies and gathering documents to explaining complicated contracts. An excellent lawyer who is an expert on these matters is Attorney Nini Hayden. You can contact her at (417) 537-0031 to get a free consultation with her. She can also be emailed at mcauthoritys.nh@gmail.com. Nini was referred to me by one of my customers, and after talking with her, I can assure you that she is the real deal, and will not take advantage of you in any way. Give her a call and explore the possibilities. She is also excellent at helping first-time truckers with their operating authority and at a very reasonable cost. Nini prides herself on being a one-stop for first-time truckers.