In case of the trucking companies, big as well as small, there are situations when the cash needs are high and the customers are not paying up on time or amounts are stuck in a credit period. Trucking companies need regular financing for the daily needs like truck maintenance, wages and gas and so on. However, as they are stuck up with delayed payment or credit payment, they have a tough cash flow. For this, one of the best finance options is that of the truck factoring. Truck factoring is nothing but purchasing of the invoices of the trucking companies by the truck factoring companies and paying a certain percentage of the amount to the trucking companies.
The advantage of such factoring for transport companies is that they get finance or cash when they require it and the bills or invoices are collected by the factoring companies later, on the invoice due date. Moreover, the trucking companies need not be stuck up with the traditional banks for finance. When the company is new it hardly gets finance easily from the banks that rely on the creditworthiness of the customer before financing.
Being new, these companies can hardly show anything. Thus getting finance becomes very difficult and this could be very demanding on them and slow down their growth. The additional advantage is that the factoring companies may not check the creditworthiness of the trucking company, but are more bothered about the credit. The decision may be dependent only on these factors. The added advantage, for the trucking companies may be seen as having to deal with reliable companies with good ratings, government agencies and so on.
The process of getting finance is also easy and relatively quicker. It is a simpler and easier process for the trucking company to get the funds. These companies take the risk of credit collection upon themselves. This frees you from the worry of collections and follow ups and other related matters. Around 60% to 96% amount of the value of the invoice may be received by you, and when the entire bill amount is collected the remaining is paid after deducting some service fee of around 4% or so, you get the remaining amount. This is a finance given and not a loan.
Thus, a new debt is not added up and nor is any collateral required. Moreover it has a better effect on the balance sheet as your accounts receivable are lesser. The trucking companies can use these services to get working capital needed by them for various purposes. A timely availability of funds allows the company to move ahead with expansions and improved services. The amount may be available in even less than four hours. The collection process is also a systematic one thus reducing the collection cost.
With the collection responsibility being undertaken by the factoring company, the trucking company may concentrate on other activities. Moreover they do not have to deal with daily arrangement of funds. You also have a chance to improve the credit rating. With the timely availability of funds you can pay off your vendors on time. This enables you to avail of any further credit needs. You may concentrate on other activities like marketing, sales and other activities for the growth of the organization.
Factoring is very useful for upcoming companies as well as established organizations. Making optimal use of the services, the company can grow even if you do not get finance from the other financial institutions.