Why You Should Consider Freight Factoring

Posted by on Jun 21, 2017 in Factoring | 0 comments

Factoring may be the financial strategy you need in your freight operations. You probably heard that somewhere before. But what exactly is factoring?

Factoring refers to the selling of invoices to another party with a discount. In relation to freight operations, it can be used by freight companies to sell their customer invoices to a freight factoring company, usually with a cut of 1 to 5 percent.

This looks like a bad idea, because why is your freight company selling your invoices for a reduced price? It actually has hidden advantages.

It gives you instant cash

The thing about freight operation customers is that they often don’t pay immediately. There are even instances where they take months to make the payment. As a freight operator, this means that you will not immediately get your profits, and that can be a problem.

By selling your customer invoices to a freight factoring company, you can get that instant profit you rightfully deserve, even if it means giving a minimal discount.

It gives you financial cushion

A freight factoring company is also a business, and they gain profit by buying your invoices with a discount. The discount the freight company has given is basically the freight factoring company’s profit once the customer pays up.

But business is a two-way street. You are helping the freight factoring company gain profits while it helps you get instant cash without waiting for your customers to pay up. This instant cash is very helpful because you have employees to pay and operation costs to cover.

It gives you assurance

According to the website of TBS Factoring, there are various factoring packages to choose from to ensure that you have the proper financial model for your freight operations. For example, you can have lower fees if you allow the freight factoring company to get back at you if a customer fails to pay up. But the fees can be higher if you let the freight factoring company handle the risk of credit.

Whatever you choose, you are assured that you can instantly get cash and profits from your operations, and that may be the very thing that keeps your business afloat.

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