When running a trucking business, you need to have a high and sustainable cash flow for effective operations. This can, however, prove hectic when you lack the right financial plan. While there are many financing options available in the market, there are only a few, such as freight factoring, which can suit your trucking business needs. As much as many benefits come from factoring in your freight bills, there are also some cons that you should know.
Advantages of Freight Factoring
Easy Access to Cash
With the need for a higher cash flow in the truck and freight business, you should be ready to handle the related needs when they arise. This can, however, be hectic if your business is struggling. But with freight factoring, you have immediate access to cash for your business needs. As long as your invoices are active, there no limitation on how much you can get.
Saves You Time
Unlike other financing options where you have to spend weeks on the application process, factoring in your freight bills only takes a few days to get approval. There is also flexibility with the process as you can factor in as many invoices as you need without feeling pressured or binding long-term contracts.
Personal Creditworthiness Doesn’t Affect Approval
Most banks and lenders will be keen on personal credit information before approving the application. In most cases, this affects your efforts. This is, however, different with freight factoring, as you get approval despite the poor personal credit.
Disadvantages of Freight Factoring
Interest Rates Can Get Higher
Compared with other financing options, freight factoring can prove costly due to the interest rates of the lender. There are fewer regulations on the rates and are mostly dependent on the agreement you have with the lender.
Customers Can Disappoint You
Cases of delayed payments from your customers to a larger extent can affect your ability to get the needed funds. Unless you are sure about the repayment plan of your customers, it might be risky factoring in your freight bills.
It Only Works With a Reputable Company
You will put your business at risk of collapsing when you deal with a wrong factoring company. You should only consider a company that is highly regarded in the industry and offers the best services.
Note that freight factoring becomes a better option with the need for an effective financing option, but only after you understand what it entails. Reach out to Fortis Funding for professional guidance.