Freight factoring isn’t fundamentally different from any business that employs their accounts receivable to maintain (or improve) their cash flow. With it, you can make sure your business doesn’t suffer from clients that remit payment slowly and hamper your ability to meet your daily financial obligations.
The Single Biggest Advantage of Freight Factoring
There are plenty of advantages, but the biggest one by far is the primary reason to employ freight factoring. You receive your cash very quickly – often well within the business week. This helps you continue meeting your financial obligations while keeping things professional with your clients. Since it isn’t a business loan, there’s no interest to eat away at your cash flow. Your accounts receivable has now become a liquid asset.
Activity And Other Benefits
Once you find a freight factoring company, all that’s left to do is sell your accounts receivable to them; they will pay you about 80% of the total value of your invoices. Afterward, it is now their responsibility to pursue your clients (really, they just wait until the specified payment due dates and collect the payments). Once all invoices have been paid, the factoring company sends you the remaining 20% after they take their agreed-upon, contract-specified fee.
Frankly, there aren’t too many noteworthy downsides to freight factoring. Of course, if you have bad customers who default, then this could be a problem. However, the detriments of this are hardly exclusive to this business vector. Most companies have back-office support. This further lessens the load on your financial department and lets you focus on selling quality products/services by outsourcing financial services to the specializers.
For more information on lending in general and freight factoring specifically, contact Progressive Capital Funding today.