Small Fleet Trucking Company
Staffing Automotive Detroit
Trucking is one of the backbones of the transportation industry, and it plays a vital role in society overall. Consumers need products, and in order to get these products where they need to go, trucking companies are relied upon heavily. Starting a small trucking company can be a good way to take advantage of this thriving market. If you take the initiative to start a small trucking company, you may be able to secure some good deals, but there are a lot of factors that you probably will not take into consideration on the front end.
One of the big challenges that small trucking company owners face is figuring out how to handle cash flow. They may be able to get a deal to haul freight across the country, but it's going to take some money to run things along the way. The trucker is going to need fuel, the truck may need maintenance, and wages will have to be paid. If the companies that need to move freight from one place to another paid on the front end or right when the freight was delivered, that would make things a lot easier on trucking company owners. However, most of the time, the bill isn't paid right away. The trucking company has to give its customers some terms. The terms may be 30 days, 60 days, or 90 days, depending on the arrangement.
During that time frame while the trucking company is waiting on payment, it is transporting a lot of other freight to different customers. It is buying more fuel, paying more wages, paying more overhead, and a lot of other expenses. Even if the company is doing a lot of shipments, it still may go out of business if it can't afford to pay the bills.
This never ending cash flow battle is a problem for most trucking companies that are just starting out. They have a hard time making ends meet until they build up some cash reserves to use for these situations. If you're a new business owner, however, this isn't going to help you in the short term. You need to improve your cash flow and improve it now if you want to be around long enough to collect payments from your customers.
Because of this issue, many trucking companies turn to freight factoring as a way to help with cash flow. What exactly is factoring and how could it help your small trucking business?
The basic idea behind freight factoring is pretty simple. You work with a freight factoring company to get money for the shipments that you have completed. You turn in an invoice to the factoring company, and they give you an advance amount that is less than the total value of the invoice. The freight factoring company then collects payment directly from a customer instead of forcing you to wait around on the payment to come in. At that point, the factoring company will keep the total amount of the invoice, which provides them with a small profit on the deal.
You get your money almost as soon as the job is completed, without having to wait around on a customer to pay. The factoring company makes a little bit of money for taking on a risk and for waiting on the customer to pay. If the customer doesn't pay, it's the factoring company's problem, as they own the rights to collect the balance.
Why exactly would you want to get involved with freight factoring? For one thing, it can significantly improve your cash flow. You can get money as soon as you have completed a run, instead of having to wait longer. This makes it easy to get the money that you need to pay your bills. It also takes a lot of the financial risk off of your shoulders and puts it squarely on the factoring company. They have to do their due diligence in deciding what invoices they'll factor, and which ones they avoid.
Another big advantage of using this type of factoring is that you don't have to worry about your business credit holding you back. If you were to walk into a bank and try to get a loan for cash flow purposes, the bank would look at your personal credit and your business credit to determine whether you can qualify for the loan. If you are a new business, you probably won't be able to get approved for a business loan unless your personal credit is excellent and you have a good income or assets.
With a freight factoring arrangement, your personal or business credit does not come into play. Instead, the factoring company looks at the credit of the customer that you are selling your services to. If they look to be a good credit risk, then you can get approved for the factoring deal. This is a lifesaver for many businesses because they don't have to worry about getting approved for a loan.
Factors to Look At
Factoring companies for small trucking companies help improve your cash flow, there are several factors you should evaluate before choosing a provider. For example, you have to look at whether the factoring company has a good reputation in the industry. You want a company that uses good customer service techniques to collect their money, instead of sounding like a collection agency.
You should also find out exactly what it is going to cost you. While most factoring deals are well worth the benefits that they provide, some companies will try to charge a lot for their service. If you end up paying too much, it might defeat the purpose of improving your cash flow. You have to look at how much you charge for each customer, and determine if there is enough profit figured in for you to afford the factoring costs.
In some cases, the company may try to add additional fees for this type of service, if you don't pay attention to how much you're paying. Many companies are reputable and will give you a detailed listing of all of the fees on the front end of the deal.
Before agreeing to any factoring deal for your small trucking company, you should also find out about the terms of the arrangement. For instance, find out when you will actually get your money. Find out if you're going to get your entire payment up front, or if you'll get some now and some when they collect from the customer. Sometimes, companies will hold back a little bit of the advance until they get paid so that it reduces their risk to some degree.
As long as you do your homework and find a good company to work with, factoring can really work out to your advantage. Instead of having to be at the mercy of your customers, you can take control of your business. Once you have significantly improved your cash flow, you can move onto doing bigger and better things. No one wants to essentially be held hostage by the whims of their clients. Once you get involved with factoring for small trucking companies, you can forget about this notion.
As your cash flow improves, you will become a much more stable business that can employ more people, take on more jobs, and buy more trucks. As you start to pick up more trucks, you'll be able to do more routes, handle more shipments, and eventually make more money. If you are in a good position to be able to start a small trucking company, factoring is a tool that should not be overlooked at any point.
Get out of the bill collecting business and get into the trucking business. Your customers won't mind having to make a payment to a different company, and you won't mind all of the extra cash that you have sitting in your business bank account.
The process to get started is generally very simple. You contact a factoring company, fill out an application for a deal, and then they evaluate it. They'll review the application and the customer you are dealing with. At that point, they'll notify you right away of whether they will factor the deal. They'll then wire you the money you need, and you are free to use it as you see fit for your company.