How Factoring Benefits Reefer Haulers
Posted on February 01, 2018 in Transportation
Reefer haulers are responsible for carrying perishable goods, and time is of the essence in this type of transportation. If they do not transport the goods on time, it can cause problems with food contamination and a disputed freight bill. Refrigerated foods need to have guaranteed freshness. With this, the entire business can be affected if reefer haulers are slowed down due to non-paying or slow customers. Trucking companies need cash flow to sustain expensive overhead in reefer equipment.
Factoring companies cater to almost all types of trucking businesses. However, factoring companies seldom cater to reefer haulers for a number of reasons. One of them is the fact that the goods reefer haulers deliver are perishable. Due to the intricate process involved in factoring, these companies often only consider dealing with trucking companies that transport low-risk loads. Be sure to select a factoring company that is comforatble with funding on referigerated freight bills.
You do not need to consult with a bank in order to get cash that you need to effectively manage your trucking business. While it may seem confusing at first, the services offered for financing receivables in the trucking industry by factoring companies are a key to success. Once you understand how to benefit from these services, you will no longer need to worry about waiting for freight bills to get paid so that your drivers can receive a paycheck.
How financing refrigerated freight bills works
The drill is the same with every transportation company. You have your drivers go and pick up freight, and then you bill the company after delivery and Bill of Lading is signed. Sadly, the only real issue is waiting for those bills to get paid. While you wait, you can incur extra penalties for not paying your own bills on time. Regardless, if you have an unpaid freight bill, you can turn it into cash with a freight factoring company. Factoring is a financial transaction that involves selling a company's accounts receivable (invoice) to a third party or a factor.
How freight factoring companies and banks are different
There are several ways that factoring differs from bank loans, and it is helpful to understand how factoring works to put things in a clearer perspective. Most business owners are unfamiliar with the idea of freight factoring companies because these type of financing companies dont advertise as much. Since they are specifically designed to work with certain industries, the general public will not be aware of their existence. Although a bank and a freight factoring company are both financing institutions, the main difference between them is type of collateral that they require. A bank will typically tie up a loan or line of credit against property.
Financing on eligible receivables or freight bills is a fairly simple concept. The first thing that is required is an unpaid invoice. The trucking business that owns that invoice will take it to a factoring company. The factoring company will provide between 90 to 98 percent of the grand total of the invoice by purchasign the invoice at a discount of 1.5% to 3%. Delayed payments are usually the most common problems that trucking businesses face. With the help of factoring companies, day-to-day operations can run smoothly even when payments are delayed.
Financing receivables online for trucking
In the past, factoring companies were limited to a specific physical location. Today, you can use services from a factoring company for your unpaid freight bills online or with a smartphone. Initially, you may need to speak with one of the company representatives in order to set up your account. You will find that factoring companies offer many online services for the trucking industry.
Stop sweating unpaid freight invoices
Sure, there are plenty of load orders for trucking companies, but the truth is that many of them do not pay within credit terms offered. If you are being held back because you cannot figure out if clients are reliable about payment, factoring companies can help you take that fear out of the equation. This will allow you to put on new clients on credit terms with confidence because you know that a factoring company will help fund your business the same day. All around, you will soon see that there is no need to sweat unpaid freight invoices when financing receivables in the trucking industry are an effective reality.
Trucking companies with reefer haulers can increase cash flow as assets are utilized efficiently. The fact that factoring provides immediate cash for these companies allows for business stability. Reefer haulers will only be fully operational if finances are well taken care of.
Increased cash flow can have a domino effect on a trucking company. With materials ready, productivity can increase as well. Companies can also be much more organized. In turn, trucking companies that use reefer haulers gain complete control of their business without having problems with their finances when they use factoring.