A trucking factoring service is a company that allows transportation companies to exchange your unpaid invoices with cash. The company often pays 80%-90% of the total invoice value upfront, then pays the remaining percentage after your customer pays up. This is after subtracting their small service fee.
Most trucking factoring services check your debtor’s credit, meaning you qualify based on your customers’ creditworthiness and not your own.
These are some advantages you can get from commercial factoring companies.
1. Improved Cash Flow in your Business.
Factoring financing provides your firm with immediate cash, allowing you to keep running your business instead of haggling with debtors to pay. This also improves your credit rating, making you more eligible for a bank loan should you desire one.
2. It Provides Alternatives to Traditional Funding.
Commercial factoring services have proven to be a reasonable alternative to loans and borrowing. Many lending companies tend to be wary of small and medium-sized enterprises and are likely not to provide you with a loan when you need one. Invoice funding, however, is less rigid; qualification is usually based on your customer’s creditworthiness.
3. It Enables Growth in the Business.
Commercial factoring companies provide your business with a steady flow of cash, allowing you to meet your overhead costs and seize more business opportunities comfortably. You are also able to focus on attracting new customers instead of following up on payments for services already rendered. This helps your business grow in the long run.
4. It Eliminates the Risk of Late Payments and Bad Debts.
Since commercial factoring services payout money against your invoices, you are remunerated for all the services you have offered. This protects you from the threat of bad debts and late payments, which could potentially cripple your business over time.
5. They Offer Extra Off-Book Services.
Many trucking factory services help your business by doing background checks on a customer’s creditworthiness on your behalf. They may even offer bookkeeping and collection services. This allows you to focus solely on your business.
Small business factoring could be the big boost your business needs. However, there are certain popular myths concerning commercial factoring companies that we ought to dispel.
Myth 1: Invoice Funding is Only for Underperforming Businesses.
This is not true. Invoice factoring is more suitable for well-performing companies that are on the verge of growing even more prominent. This is because commercial factoring services only pay cash against invoices for business already undertaken, meaning companies that aren’t handling significant orders are likely to find it harder to qualify.
Myth 2: Invoice Funding is Expensive.
Most commercial factoring services usually charge only a small percentage of your total invoice value. This is a steal on your part, considering how much you have to gain from the constant stream of cash that invoice funding promises.
Myth 3: Invoice Factoring Companies take too long to Release Funds.
This is completely uninformed. Although under some circumstances, especially if the invoice is hefty clearance may take a while, many companies pay you in 1-4 days. Some even pay as soon as 24 hours later; invoice factoring is generally hassle-free.
Myth 4: Approval Qualifications are too stringent to meet.
Commercial factoring companies have qualification criteria that are less exacting than those of most banks and lending institutions. Trucking factoring services generally check your customer’s creditworthiness, and not your own, meaning you are more likely to qualify for payment than for a bank loan.
Commercial invoice factoring is a good way of ensuring your business always has a steady flow of income. They help small businesses bridge the gap between the time of service delivery and the time payment is received. More small companies should turn to invoice factoring to ensure they do not suffer from late payments and bad debts.