| Owning a trucking company or logistics company | | | | factoring. Factoring can provide logistics companies |
| (freight brokerage) can be very profitable. At the | | | | with the financing they need to meet their current |
| same time, transportation companies tend to be cash | | | | expenses and grow. And, as opposed to bank |
| hungry. There are fuel expenses, employee | | | | financing, factoring is easy to obtain and can be |
| expenses, operator expenses, repair expenses and | | | | setup in about a week. So what is factoring? |
| many other expenses that need to be paid quickly. | | | | Factoring provides companies with an advance on |
| However, most customers don't offer quick-pays and | | | | your slow paying freight bills. This enables them to |
| usually pay their freight bills in 30 to 60 days. | | | | meet expenses while waiting to get paid by |
| This creates a major challenge. Why? You have | | | | customers. It works as follows: |
| expenses that need to be paid quickly and customers | | | | 1. You company delivers the load and invoices the |
| that want to pay slowly. Unless your company has | | | | customer 2. The factoring company provides you and |
| some available funds, you will most likely run into | | | | advance of up to 90% of your freight bill 3. You can |
| problems. | | | | use the advance to meet all expenses 4. Once your |
| Many company owners try to address this cash gap | | | | customer pays, you'll get the remaining 10% less a |
| by trying to get business financing from their bank. | | | | small factoring fee |
| However, they soon learn that banks seldom provide | | | | The cost of factoring can be anywhere between |
| business loans to small transportation companies. | | | | 1.5% to 3% per month. The cost is determined by |
| Unfortunately, a business loan is not an option for | | | | your industry, the quality of your customers (who |
| most logistics and transportation companies. So, what | | | | pay the freight bills) and the amount of financing you |
| is? | | | | require. Freight bill factoring is a great solution for |
| In many cases, trucking companies have an option | | | | logistics and trucking companies and can help grow |
| that is better that a business loan. It is called invoice | | | | your company to the next level. |