How Factoring Freight Bills Helps Transportation Companies

Working capital is the lifeblood of a transportation company. Whether you own a carrier or a brokerage, you constantly need to juggle fuel payments, repairs and driver salaries. What makes the business challenging is that most customers pay for their freight bills in 30, 50 or even 60 days. Slow customer payments put a strain on your cash flow. This makes running the business very hard and sometimes makes growth impossible. 
One obvious solution to this challenge is to look for business financing. Ideally a business loan can be used to strengthen your bank account and help cover any gaps in your cash flow. However, qualifying for business loans can be challenging as there are many requirements that you’ll need to meet. This includes having audited financials, two to three years of profitable business experience and meeting the financial institutions collateral requirements. 
There is another alternative though. Suppose that you could get an advance on your clients slow-paying invoices. So instead of waiting - you would get paid a substantial amount. If you consider this for a moment, you would realize that most of your working capital problems would go away. You would have enough funds to pay for fuel, drivers and repairs. And there is one way to achieve this – it’s by factoring your freight bills. 
Factoring provides an advance on your slow paying invoices. The advance is usually about 90% of the invoice, with 10% held in reserve. The 10% reserve is returned to you, less a small service fee, once the invoice is fully paid for. invoice factoring has a number of advantages. For starters, it’s easy to qualify for. The biggest requirement is that you do business with credit worthy clients. Aside from that, you must own a well run business with good prospects for growth.
 Another advantage of accounts receivables factoring is that you funding line is tied to your sales. This makes invoice factoring a dynamic financing product, were your line increases as your sales increase. This is an ideal solution for transportation companies with solid growth plans.