What is Freight Factoring?

Building your fleet requires constant investment. With payment terms extending up to 90 days or more, you may want or even need to be paid now. That’s where freight factoring comes into play.

In logistics, freight factoring is a quick fix to drawn out payment terms. A carrier sells an invoice to a third-party financial company. The financial company takes on the responsibility to seek payment for the invoice in exchange for a cut of the payment.

What are the benefits to factoring?

Increased cash flow – Getting paid earlier means more cash on hand to cover expenses.

Back office time saved – Getting paid on time will free up your back office. No more chasing down payments or tracking who has and hasn’t paid. Plus, some factoring services may integrate directly with your current systems.

No extra debt – FreightWaves estimated the total cost of operating a truck could lead to an 88% or higher operating ratio. The increased cash flow can help you pay today instead of incurring additional fees.

Less credit risk – One load with a late payment can wreak havoc on a credit score and company. Factoring companies can check the credit score of shippers and brokers, while most smaller trucking companies can’t.

So, a benefit of using a factoring company spoke to you. With this additional flexibility, you could be ready to grow! Though, deciding if a factoring company is right for you is only half the battle.

What should you look for in a factoring service?

Fees – Factoring services can help reduce costs and expenses. Compare the factoring company’s fees with your company payment and invoicing processes. If you’re collecting payment on your own, consider the downtime you could save as well.

Contract terms – Stopping and starting a factoring service may not be easy. Remember to check the length of your contract and any fees for early cancellation.

Invoicing – Building an invoice through your preferred factoring service can be a hassle. Make sure their systems are right for you.

Industry expertise – Set yourself apart from the competition with a factoring provider who can boost your standing with customers.

Access to brokers – Your factoring company of choice may have access to brokers who can connect shipper and carrier. Plus, using their brokers can avoid additional start up time and allow you to get on the road.

Integrations – Factoring services may integrate with your standing systems, creating an additional time-saving opportunity.

Freight factoring services can have a huge impact on your business. You can foster better relationships, save money, and facilitate business quicker.

Axele directly integrates with your factoring company of choice to allow for effortless time and money saving opportunities. Axele is a proud integration partner of various factoring services.

To learn more about who we integrate with, contact us today.

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