Maintaining cash flow is one of the major challenges that every independently-owned companies can face. This is particularly true with freight companies which can be very susceptible to experiencing a low cash reserves. Aside from that, there are other factors that may come into play which could deplete their treasury and cash flow. Fortunately, there are many ways that a freight company can protect their cash flow and one of them is freight factoring.
Before we get into the benefits of such method, let us first understand what freight factoring is all about. Freight factoring is a cash advance funding arrangement that lets business owners sell their customer invoices in exchange for lump sum payment equivalent to the value. Freight factoring releases the company from the responsibility of collecting from its customers. Truck payments, for example, are collected from the customers and remitted to the business after deducting certain fees.
With freight factoring, financing lines will usually be approved in one day after availing of a complete application package. This method can come in handy during cash flow emergencies. Since cash flow has been improved, freight factoring can help the company take on more loads and acquire new customers. It provides companies with a quick fix for getting the funds they need for settling expenses.
Another benefit of freight factoring is that companies can improve the credit quality of their current and new customers. The method will help the business identify good payers so that they can work with the best clients. Freight factoring also offers flexibility- as revenue grows so does the financing line. As long as the customer meets the factoring criteria, the financing line can grow easily. With growth, the factoring line can accommodate more loads and new customers since the waiting period for payment has been gradually reduced.
So if you are looking for a way to finance unexpected costs, freight factoring can prove useful for taking your company to greater heights.