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How the Freight Factoring Industry Works

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The freight factoring industry is a blessing for those trucking companies that face the problem of slow paying customers. It is critical for the trucking companies to get paid on time as they have to deal with some expenses on a regular basis, the timely payment of which is very important. It is necessary for the growth of the company that they make payments to others on time and receive timely payments from the customers. However, this is one hassle they have to deal with very carefully.

Making them pay earlier or quicker may upset customers. At the same time it is necessary to pay the drivers, you need money for gas, for repairs and many other such activities. This is something which cannot be put away for some other day. Thus it is necessary to get finance to keep the business going.

The factoring process is simple and getting such finance is much easier than getting finance from the bank. The credit history of the customer from whom the bill is to be collected is more relevant than the credit rating of the trucking company. Some factoring companies provide finance in 24 hours time. The working is quiet simple. The factoring company purchases your freight bills and gives you an advance amount about 60% to 90% of the amount of bill.

Whatever payments are to be made by the trucking company can be made from this. It waits for the client to make the payment on the bill date. The money required by you is received when you have the requirement for it. With these funds your regular need which are linked to the company's growth are taken care of, on a timely basis. The remaining amount of the bill is paid to you when the customer pays the bill amount to the factoring company. Certain percentage of amount of the bill is taken as factoring fees by the company. It may be around 1.5% to 3% per month. The cost is decided on the industry, the creditworthiness of the customers and the amount of finance required by you.

Freight bill factoring has its own benefits. The main benefit to the trucking business is the timely availability of funds. Setting up an account with the factoring company is easy and may take just about 3-5 working days. The trucking company does not work from a situation where there are no funds when required and surplus amidst availability. The company can pay the drivers on time and keep them happy. As and when the repairs and the fuel are required these expenses can be taken care of.

One major advantage is the company need not worry about the collection of the bills and the related activities. Things like collection reminders are taken care of by the factoring company. The risk is transferred to them. The cash flow also stabilizes thus allowing the trucking business to grow. Another advantage that the companies have is the access to the credit experts who can help sort out non-collectable customers.

Freight factoring is a great option to solve this problem of the transportation companies. It provides a good solution to bring in financial stability and an improved cash flow which furthers the growth prospects and efforts of the business.
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