Trying to get a business loan won’t help. Banks only give business loans to companies that have a great history and solid track record.
Caught between drivers that need cash now and clients that want to pay slowly. And unless you have a nice cash cushion in the bank, something has to give.
Basically, the factor eliminates the 30 to 60 days it takes to get your freight bills paid. With factoring, you get your freight bills paid in about 2 days.
Factoring is flexible and grows with your company. As opposed to having arbitrary limits like business loans or lines of credit, factoring limits are driven by your sales. The more you sell, the more financing you qualify for.
Owing a freight brokerage business can be profitable and very rewarding. As a freight broker, you know that your business is very cash intensive.
Here is how factoring works:
- You submit a copy of your freight bills to the factoring company
- The factor advances you between 90% to 98% of your freight bills (sometimes they hold a small reserve).
- Your get immediate use of the funds. The factor waits to get paid.
- The reserve is rebated as soon as your customer pays the freight bill if the factor held a reserve.
Owing a freight brokerage business can be profitable and very rewarding. As a freight broker, you know that your business is very cash intensive. Basically, the factor eliminates the 30 to 60 days it takes to get your freight bills paid. With factoring, you get your freight bills paid in about 2 days. That gives you the cash you need to pay drivers and meet other business expenses.
Factoring freight brokers is a specialty type of factoring and not all factoring companies offer it. Those that do will help you succeed beyond your expectations.
Factoring costs are driven by three variables: a) monthly financed volume, b) your customer credit worthiness and, c) how long the freight bill goes unpaid. As a rule of thumb, rates go between 1.6% to 3% per month, depending on these variables.
