How Freight Factoring Beats Other Financing

by David Jenyns on December 19, 2011

Beginning a trucking business is pretty easy nonetheless it is rather hard to keep it running nicely. This is due to the fact that many clients pay their dues after 30 to 60 days to a trucking company. On the other hand, a trucking company has to make financial arrangements to pay for power charges, salary and other daily costs. Therefore, it's required to have an abiding solution to keep the business running while extending credit to clients at the same time.Freight factoring is the most suitable option to run your trucking business smoothly without any type of monetary problem.

Approaching banks for finance is the commonest method of getting required funds for a trucking company. But many banks ask for bigger collateral, particularly for a new trucking company. Moreover, a loan is backed by diverse harsh rules and rules to follow. In addition, banks offer finance for a fixed term with a set rate of interest, and truckers have to pay fixed monthly payments to repay the loan amount together with interest. Besides, this, if you run short of finance and need additional cash, it is almost impossible to get additional finance from banks.

On the other hand, freight factoring corporations buy your credit invoices and pay the mandatory funds to meet your costs. In exchange for their services, these factoring companies charge a factoring charge of 1.5 percent to 5 %. The amount of fees charged is dependent on the credit record of your customers, the credit period extended to customers and the volume of business you do with the factoring company. Freight factoring guarantees quick availability of cash through credit invoices; you may have the necessary finance to meet your daily business costs to keep the business running without waiting for the payment to arrive from your clients.

Moreover, freight factoring firms collects the factored bills on time which is not the case with standard bank finance. This eases the trucking company from the headache of collecting money from clients on payment date, and they can concentrate on sales and other business activities. Besides this, there is no need for any collateral to get finance which is the case with bank finance. Thus, there are numerous advantages of freight factoring over normal bank finance.

The amount that you receive from factoring company is dependent upon the invoice value. Since the balance amount is transferred to your account after deducting factoring costs and amount, there is no such thing like repayment agenda. Also, you have got the freedom to factor all or some of your invoices depending on the amount of money you need. Besides meeting daily expenses, you may also use the funds acquired by factoring for investment and other purpose which is not possible with bank finance. Thus, freight factoring provide a great way of getting mandatory funds to keep your business running without getting tied up with fixed monthly payments for a fixed period. Due to these reasons, freight factoring is beating normal loan financing. As a consequence, almost all of the trucking corporations select freight factoring over standard bank loan financing to get funds for their daily business expenses.

Lionel Piedmont, shipping expert, focuses on articles concerning freight bill factoring by freight factors, and transportation factoring.

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