Freight Bill Business : When a trucking company sells its outstanding invoices.
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Backed by bills of lading, to a factoring company or financial institution for cash.
This is referred to as freight bill factoring.
In most cases, invoices can be converted into cash (factored) within 24 to 48 hours.
- Factoring provides working capital that can be used to pay any expenses.
- Such as repairs and fuel costs, as well as extend credit to new customers and make payroll
- Business Factors purchases invoices outright.
- Meaning you don’t have to worry about credit-related repayment risk
- Business Factors is on hand 24/7 to provide service and answer any questions
Freight Bill Business: https://business.rw
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1. Introduction
Freight factoring services are most often used by freight.
Rail and trucking companies in the transportation industry.
Due to the incompatible payment terms that exist between the shipper and the carrier.
Cash flow problems are common in the industry.
Even for freight companies that routinely turn a profit.
The shipper generally demands immediate payment.
But the carrier usually doesn’t collect until delivery.
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2. Freight Bill Business
While many business opportunities exist.
Profit margins can be slim for small and mid-sized trucking and transportation companies.
Due to heavy competition and the lowest bidder often securing the job.
That’s why many carriers rely on freight bill factoring to shore up their cash flow.
The service allows them to get paid in 24 to 48 hours.
And requires dramatically less paperwork than a business loan.
Link to the advantages of factoring section of the accounts receivable page.
Factoring requires dramatically less paperwork than a business loan.
And allows a trucking business to get cash in as little as 24 to 48 hours.
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Freight Bill Business
3. How does freight factoring work?
Freight bill funding, or freight bill factoring is a working capital solution.
That allows a trucking business to monetize outstanding invoices.
And get paid almost immediately for work already completed.
This is achieved by selling invoices to a factoring company.
After buying the invoices the factor typically advances a large portion.
And takes out a small discount as payment.
Trucking and transportation are among the industries that have the highest advance rate.
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4. Freight Bill Business
Factoring can help a freight business:
- Ensure sufficient funds are available to cover fuel.
- Vehicle maintenance and repair, containers, drivers’ payroll.
- Licensing fees and insurance expenses
- Improve cash flow and operate in a more efficient manner
- Ensure money is available to bid on future jobs
- Expand company’s vehicle fleet to take on new routes or haul additional loads
- Invest in marketing or promotional activities to attract new business
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5. Freight Bill Business
To see why factoring is a good alternative for your business.
Please check out the “Why does your business need factoring?” section on our Invoice Factoring page.
Factors typically charge 1% to 5% discount rate for their services.
For additional information on the factoring fee structure, please see our Asset-based Lending page.
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6. Freight Bill Business
Some of the largest consumer factoring companies in the world include credit card companies.
Such as Visa and Mastercard.
At the same time, commercial clients are served by specialized freight factoring companies and banks.
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7. Freight Bill Business
Factoring relies on the creditworthiness of your clients.
Making it an ideal option for freight companies that are just starting out.
To extend freight factoring services.
Factoring companies run a credit check on your clients.
This apprises you of your clients’ risk profile.
Allowing you to make informed decisions about maintaining a business relationship with them.
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8. Which types of businesses qualify for freight bill factoring?
Most trucking and transportation businesses qualify for invoice factoring.
Companies that can benefit from freight factoring services include the following:
- Large transportation fleets
- Owner-operators
- Intermodal and container companies
- Freight brokers
- Dump truck haulers
- Long-haul truck load, local delivery or international
- Automobile transporters
- Haulers for credit-worthy shippers
- Transport companies that haven’t pledged accounts receivable as collateral
- Hot shot drivers
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9. Freight Bill Business
The most important qualifier for getting approved for factoring services.
It is a customer base with reliable credit history.
With a record of paying bills on time.
The second most important qualifier is that your invoices are free and clear.
Meaning you don’t have any liens or loans that use accounts receivable (A/R) as collateral.
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10. Freight Bill Business
An invoice can be factored in three simple steps:
- Upon receiving your application and supporting documents (Link to What is required to take out an asset-based loan or factor receivables? On the asset-based lending page), Business Factors runs a credit check and does due diligence on your customers to determine appropriate credit limits
- Your invoices are then verified and funded within 24 hours
- Once the invoices are paid, you get the money minus the discount rate and any additional fees
11. What are the advantages of using Business Factors?
Business Factors has been providing freight factoring services since 1969.
Offer non-recourse factoring and use proprietary software.
To prevent or track billing delinquencies once your account is live.
Below are a few reasons why businesses choose us:
- Advances of up to 96% of the invoice face amount
- Fast, easy freight bill factoring set-up
- Low fees and complimentary credit checks on your clients
- Available 24/7, 365 days a year
- No upfront fees and simple credit qualifications
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12. Freight Bill Business
To learn more about our recently launched write-off protection service with rates starting at 2.19%, please visit our blog.
Any trucking business that has creditworthy clients and invoices unencumbered by liens or bank loans is eligible for factoring. With factoring, you can get up to 96% of the invoice face amount.
Here is an example of a factoring arrangement:
- Invoice amount: $2,000
- Advance rate: 96%, or $1,920
- Reserve: 4%, or $80
- Discount rate: 2.19%, or $43.8 every 30 days, capped at the amount of the reserve
- Type of arrangement: non-recourse
In this example, the factor provided $1,920 upfront and charges $43.8 as its monthly fee.
The fee is capped at the amount of the reserve ($80), so that if the invoice is collected after three months.
The client only pays $80. If the invoice is collected after one month.
The factor returns the remainder of the reserve, which is $36.2 ($80-$43.8).
If the invoice is not collected, there is no charge back to the client.
Because the arrangement is non-recourse.
Freight Bill Business
13. What additional services do we offer?
In addition to credit insurance at a fraction of the cost.
Business Factors provides accounts receivable management.
Handle collecting invoice payments.
Your time is better spent focusing on business operations and growth.
Also offer reusable fuel cards.
Where a portion of proceeds from a factoring invoice can be deposited directly.
That way drivers don’t have to carry cash.
And can refuel quickly and conveniently at the pump.
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14. Freight Bill Business
Finally, offer online account management.
Which allows people to check the balance of your accounts.
And see when a client pays the invoice.
Factoring can help experienced transportation companies.
As well as new hotshot trucking businesses.
Get started today by filling out a four-minute application.
Conclusion:
Freight companies often experience cash flow problems.
Due to the incompatible payment terms that exist between the shipper and the carrier.
Factoring – which is the sale of invoices to a specialized finance company.
Presents an optimal solution to this issue.
A factor typically charges a discount rate between 1% and 5%.
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Freight Bill Business
Any trucking business that has creditworthy clients.
And invoices unencumbered by liens or bank loans is eligible for factoring.
Business Factors has been in business for close to 50 years.
Freight Bill Business
And monetizes invoices through a simple.
Three-step process in as little as 24 to 48 hours.
Advance up to 96% of the face value.
And save you money with low fees and complimentary credit checks on your clients.
Also provide accounts receivable management, reusable fuel cards and online account access.