If you own a small business, you know how hard it can be to collect on invoices that are due and past due. Cash flow problems cause many of the small business bankruptcies around the United States. If you own a business that handles shipping, you may be interested in freight capital factoring.
- To better understand freight capital factoring, it is important to fully answer the question, “what is a factoring company?” In a nutshell, business factoring services buy a company’s outstanding invoices and pay, up to 90% up front. This can help you solve any cash flow problems you are having so you can pay your people, deal with overhead expenses, and keep your doors open.
- If you are new to the world of freight capital factoring, you may not know where to begin. It is important to find the right advance business capital factoring company for your needs. There are a lot of companies out there that handle this kind of thing and some are much better than others. Here are some tips for finding the best company for your business needs:
- Start by talking to other business owners you know and trust. If you know other people who own their own businesses, you may know people who know something about the transportation factoring companies and how good they are. You should ask more than just, “Who did you work with and how good were they?” Ask about how they found the freight capital factoring company, what percentage they received for the invoices and what they can tell you about the experience.
- Look for a company that allows some flexibility. There are factoring firms out there that take an “all or nothing” approach. Others set a minimum number of invoices each month or at the start. You may have some clients or customers who take a bit longer to pay but are reliable, regulars whom you do not want to upset. If you go with the right small business invoice factoring company, they can let you decide what invoices you want to sell and which ones you want to hold onto.
- Ask how much they know about your industry. You may end up talking to business invoice factoring companies that handle businesses across a range of industries. Before you select one, you need to feel comfortable that they understand your industry and the ups and downs it faces. Make sure the company you pick has been endorsed by the Trucking Association (this can be on the local or national level).
- Ask if they give free fuel cards. One of the highest costs for any trucking and shipping business is the cost of the fuel. Many freight factoring companies offer these to their clients. This can be a great perk.
- Make sure they are responsive to customers. If the company in question cannot seem to make the time to talk to you and answer your questions before you become a client, how much time do you think they will give you once you have signed on? Another aspect of their customer service is letting you see how things are going through an online portal. Any company that does not provide either, good customer service and online access, should not be the one you select.
- Ask about their policy vis-a-vis buying back invoices. Freight capital factoring companies generally fall into one of two categories. They are either recourse or non-recourse companies. In the former case, they require businesses to buy back invoices that go unpaid past a certain amount of time. For companies in the latter category, when they purchase the invoices, the risk of non-payment is theirs. Some factoring firms are more flexible and allow some invoices to be considered non-recourse. Before you select a company, you need to be clear on this point.
The United States is home to almost 28 million small businesses. No matter what industry you are in, getting people and other businesses to pay on time can be a real challenge. For shipping companies, unpaid invoices can pose an existential threat. Luckily, freight capital factoring companies can get you access to the funds you need to stay in business.