What is the most important thing for business? Probably every person has their answer, but everyone agrees that cash flow is one of the most important things. It is his stability that ensures the uninterrupted growth of the company, the development of activities, and the stability of payments of salaries and taxes. Unfortunately, no business will survive without it.
Today we will talk about transport factoring.
What is transport factoring?
This is the sale of your unpaid invoices to a factoring company. You receive 97% in cash. The remaining 3% will be returned to you. You don’t need a credit score to work with factoring.
Why is this necessary? Imagine that you have a trucking company. You made an order, brought the cargo to the place, and issued a trucking invoice to the client, as said here. He has 30-90 days to pay for your services by law. You need to pay for gasoline, salary, take the truck for repairs, etc. And there is no money yet. Because of this, many owner-operators close their business activities. But you don’t have to do that with factoring.
How does truck factoring work?
There are five steps that a trucking company goes through factoring process.
Step 1. The credit limit is set based on the credit of your customers
Step 2. You are sending an unpaid invoice to a factoring company.
Step 3. It is confirmed that you have indeed delivered the cargo.
Step 4. The truck factoring company reimburses you about 97% of the freight cost.
Step 5. After 30-90 days, the company will pay you the balances as soon as it receives payment from your client.
What happens if you don’t use factoring?
The first months will be challenging for you. Be prepared that you will not see earnings for the next month. It is worth working without factoring if you have significant finances and delayed payment for services is not a problem for you. But why would you spend your own money and financially ruin your business? It is much easier to sell invoices to a factoring company and develop your business from the first days of operation. You may not sell all your invoices, but only one or several. There is also an opportunity to sign an agreement with a factoring company, according to which you will immediately send all your accounts to the company and receive money.