Freight Bill Factoring - A Transportation Financing Alternative
Managing cash flow is one of the biggest challenges that transportation company owners have today. This applies both to carriers and freight brokers who must balance slow paying clients and suppliers ...
Traditionally, business owners deal with this problem by asking clients for quick payments. Sadly, this strategy seldom works as clients, who usually have the upper hand, will insist in paying in 45 days. An alternative that many consider is obtaining business financing through their local institution. However, most will not qualify for a business loan as banks usually have strict lending criteria. So, if a business loan is not an option – what is?
Fortunately there is a solution and it involves factoring your freight bills. This type of financing provides you with the cash flow you need to pay your business expenses and grow your company. Freight bill factoring provides you with a 90% advance (or higher) on your freight bills. Once your client pays the freight bill, you get the remaining 10%, less a small fee.
Factoring has a number of advantages over conventional financing. First, it’s very easy to obtain. The biggest requirement is that you do business with reputable and credit worthy clients. Second, it can be setup quickly, usually in a matter of days. But more importantly, freight factoring is flexible and tied to your sales. This means that your financing levels increase as your sales increase.
Factoring is also cost effective. Costs vary based on a number of parameters, but they range between 1.5% and 3.5% per month. When used properly it can help your company grow dramatically and serve as a crucial stepping stone to eventually obtaining bank financing.
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Commercial Capital LLC
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