If you got into the transportation business, chances are it was at least in some part due to a glamorous picture of life on the open road. You love driving, and relished the idea of being your own boss, keeping your own hours and seeing the country all while running your own business. It’s a fantastic idea, and the freight industry is a solid one. But it’s no guarantee of smooth sailing ahead. Transportation companies can be decimated by short term cash flow issues that become major headaches. Something as small as a spike in gas costs, which consumers gripe about but then simply move past, could cripple a freight company. And if you’ve got customers who aren’t paying their invoices in a timely manner things will only get more complicated. This is where factoring can really help things out. Here are five benefits of freight factoring for your business.
First and foremost, you can use the cash you receive from factoring your accounts receivable to grow you business in any way you choose. There are very few limits on the applications of that money. You can pay your staff with it, buy new vehicles, add on to your insurance policy or even handle a tax bill. The money is yours, free and clear, just as it would have been if the invoice was paid outright.
It’s also an approach to solving your cash flow issues that is completely customizable. Unlike taking out loans, you don’t have to go all or nothing. You can factor the invoices that will help you solve your current predicament, and then hang on to the others. For example, there’s really no need to go the factoring route with a customer who pays on time. But if you know you’ve got a load coming that usually takes three months to pay you out, that’s a good candidate for the factoring company. You could see a payment in a day instead of ninety days in this case.
If you use the same factoring company repeatedly, you could find them willing to offer you up some additional benefits. For example, many factoring services that work within the freight and transportation industry provide referral payments for new customers. If you’re feeling the pinch, chances are some of your friends in the same business are feeling it as well. You could see a nice payday simply by pointing a friend in need in the right direction.
Freight factoring companies often expand their services beyond factoring, giving you a go-to financial partner for the years ahead. At its core a factoring firm is much like a bank, and like a bank they make the most profit by retaining a customer and helping him into additional product lines. So see what else your freight factoring partner has on the table. Some companies will handle the credit checks you need to run on potential customers completly for free. Some create partnerships with gas companies and can provided discount fuel cards. Others head up industry networking associations, and can point you straight towards all sorts of new business opportunities. You’ll never know until you ask.
Finally, a good relationship with a factoring company could lead to some useful advice for growing your business. You might not know the first thing about the best non recourse factoring program, but your consultant at the freight factoring company sure will. Don’t be afraid to ask questions. These are financial pros, and they’ll have a ton of knowledge about the economics of the transportation industry as a whole. You might hear a tip or trick that will help your business grow exponentially!