Trucking Industry and Setting up With a Factoring Company

Trucking Industry and Setting up With a Factoring Company

There are factoring companies for all sorts of businesses. This article is mostly for the trucking industry. Factoring is one of the ways that can help your business get through a rough time or during early stages where you have enough work but not enough capital to keep your trucks on the road.

How do you find the best factoring company that will work with your size of fleet? Not all factors will work with everyone. Some will have limits to how much money they expect you to create each month. The list of factor companies is long and you can be very particular about what you want to get from them.

You should have a list of questions to ask them to see if they fit your needs. Here is a small list of questions and reasons why you need to know the answer.

What are the fees that the factor charges to get set up with them? Make sure they are affordable and shop around and compare so you get the best possible deal.

Do I need to factor all of my bills? A factor provides you with a huge amount of security when carrying outstanding accounts receivable. Your goal should be that once you are financially stable that you should work without factoring any bills. There are some good reasons to continue to use them but, they cost money.

Will you be using recourse or non recourse factoring? Non-recourse factoring is when the factor company takes the financial risk. Once they agree to factor a customer then they will give the money that is agreed upon and then they collect from the customer. Recourse factoring is when you will be responsible for the accounts receivable and you will need to re-pay the money you received from the factor company if the customer doesn't pay. There are companies who go out of business and don't pay their freight bills. When that happens everyone wants to re-coup what they can and that is why you negotiate the best deal for your company. Make sure you are familiar with these terms during negotiations.

What are their fees for factoring the bills? They will take a percentage of the bills from the settlement from the customers. If you negotiate correctly you will want to get as much money upfront as possible. Somewhere in the 90% range and they keep 3% or less. That means that you will receive the other 7% on the date each month that you negotiate during the setup negotiations. Give or take a little.

What kind of reports will you receive and how do you get paid? You want any and all data that you can get from them. You'll want to make sure that there system of payment will be accepted by the truck stops that you frequent. Your local neighborhood bank is not on the other side of the country so you'll want to ensure that your card or checks or authorization codes will be accepted at as many places as possible.

A good factoring company will provide you with everything you'll need. Find a company that many other truckers are using. See what sort of credit checks they will do for you when you find a load that you want to carry. Most of the reputable factor companies will not allow you to carry a risky customer's load. If you do decide to carry a load that they say is too risky then the factor probably won't factor it or only give you a small amount of upfront money.

Even new customers have to start somewhere and the factoring companies realize that so they do extend credit to them on a low budget. Once they prove themselves then their credit limit will be raised.

Ask all of these types of questions when searching for your factoring company.

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