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