Many diverse industries can be found across the United States today, and these industries are carried out by large and small businesses alike. In fact, nearly 28 million small businesses can be found across the nation, and together, they can do a lot of work. These companies may be farms or manufacturers, for example, or they may provide services such as IT work or maid work. In other cases, American businesses are carriers, or freight companies. They make use of the nation’s 12 million trucks, sea vessels, and train cars to deliver anything from livestock to automobiles to goods for retail stores. These freight companies make their profit from collecting invoice from shipper clients, but sometimes, a third party is needed for paying invoices for loads shipped. Freight capital factoring, or freight bill factoring, may be done with the help of load factoring companies. Just what are load factoring companies, and what do they do? Load factoring companies are a major part of today’s freight industry, and the best invoice factoring companies can help protect carriers from bankruptcy. First, one might consider carrier companies themselves.
Carriers and Freight
It is not enough for farms or factories to produce their goods. It is just as important for vehicles to deliver these goods to and from factories, warehouses, and retailers, and this is where freight load companies come in. As mentioned earlier, such companies use many different vehicles, often in huge numbers, to deliver good across the nation, and this supports many American jobs. The Federal Motor Carrier Safety Administration has estimated that freight companies support some 5,9 million commercial vehicle drivers today, for example. These companies sometimes use specialized vehicles or specially trained crews for different cargo for their clients. Some trucks are reefer trucks, meaning that they have cooled and refrigerated cargo bays for dairy, wine, and frozen foods. Other trucks, and their crews, are meant for carrying dangerous or hazardous materials, ranging from canisters of flammable natural gas to liquid nitrogen or even nuclear fuel rods. Carriers make their money when they charge invoices to their clients, but even if such invoices arrive on time, carriers have pressing expenses on their hands. Carriers have to pay for fuel and maintenance, not to mention crew salaries or other expenses. This is where load factoring companies come in to help.
Freight Invoice Factoring Today
What exactly is the work of modern load factoring companies? They act as a sort of middle man and lending service on the carrier company’s behalf in anticipation of invoices being paid late, and this can save smaller companies. Small freight companies may even go bankrupt if they wait too long to receive invoice payments, so they can avoid this by hiring load factoring companies to help out.
This process begins when a carrier has sent its invoice to the client shipper. The freight company will now look for invoice factoring companies who may be interested in helping out. It should be noted that the better a company’s business credit is, the more invoice factoring companies may be interested in helping out. And once a factoring company is brought into the picture, it will assume the rights to collect 100% of the invoice’s total value once paid. In exchange, the factoring company will lend the carrier client a large percentage of the invoice’s value, often 70-80% or so. This is a large sum of up-front money as a loan, and a carrier company will urgently need such funds to cover its own expenses. Smaller companies don’t typically have large cash reserves to fall back on, so this up-front money can make all the difference while an invoice is still pending.
Once the customer does pay the full invoice value, the factoring company collects it all, as arranged earlier. At this stage, the factoring company sends another, smaller percentage of the money to the carrier client, often adding up to 95-98% of the invoice’s value. The factoring company, meanwhile, keeps 100% of the invoice payment and 2-5% extra, which is how the factoring company makes its profit. The carrier client, meanwhile, will sacrifice 2-5% of the invoice value in exchange for up-front money, and this is nearly always a smart deal for that carrier.