Why Your Trucking Business Needs Factoring
There are many reasons that a trucking company might benefit from factoring, as seen in the clip “Trucking: Why You Need a Factoring Company | Factoring Explained in 5 Minutes”. Factoring is a process in which someone who has an asset with a long-term value lease it to a business in return for an upfront payment or loan. In specific industries, the long-term value of goods can be high.
However, they often have comparatively low current cash flow. That is where factoring comes in handy. Factoring allows you to receive cash for bills upfront instead of waiting for payment. This means you can now use the money for bills or other expenses rather than wait until the shipment when the goods are sold, and payment is received.
Your trucking business will also have more financial flexibility. This is because you have working capital from the factored account. A factoring company reduces short-term expense obligations. When your trucking business borrows money from a bank, it usually does so on an interest-bearing basis. This can cause a strain on cash flow because of interest payments that must be covered as soon as possible.
Factoring minimizes these costs by relieving you of this burden. Factoring allows the trucking company to receive payment for its invoices more quickly. It ensures that it has the funds to cover operating expenses and other obligations before making credit card or cash payments. Factoring can prevent the trucking company from being on the hook for late or short payments to vendors.