Why Freight Broker Companies Need Factoring



Do you want to grow your business faster?

As a bridge between carrier and shipper, freight broker companies already have a lot on their plate. Managing invoices can become too overwhelming especially with too many shippers paying net 30 or even net 90.

If you want to grow your freight broker business faster, you need to shell out funds consistently to meet the demands. The problem, however, is if you’re not getting steady cash flow to fuel your budding enterprise.

This is where freight factoring companies come in.

Freight broker companies partnering with freight factoring services get paid faster. If you’re still on the fence about going this route, here are four reasons why you need a freight broker factoring program:

1. Provides a Reliable Cash Flow

Freight factoring is a type of financial approach that converts outstanding invoices due within 90 days into immediate cash for your small business. In a nutshell, you’re selling your invoices to the factoring company so you get paid faster.

You no longer have to wait for your shippers to pay after 30, 60, or even 90 days. This approach can dramatically improve your cash flow, allowing you to address the day-to-day costs of running your business without having to go into debt.

Here’s an overview of what you’ll experience after receiving approval from a factoring company:

  • You receive up to 90% of the approved invoices depending on the company’s policy
  • You can start using the payment immediately to grow your business
  • The remaining 10%, minus their fee, is sent to you after the shipper pays up.

While you still have to wait until the end of the pay cycle before getting the full 100% of the payment, you can start using 90% of the bill as soon as you get approved.

2. Easy Application and Approval

Out of most other forms of finance, a freight factoring broker program is easy to get into. The entire processing time is faster because there are not too many variables to consider.

Freight factoring companies place a huge value on the shippers that you have. If your shippers have good credit, you’ll get approval faster. Also, your company must have a good credit record and free from judgments or liens.

If you’re just starting up, you should get into a freight factoring broker program as soon as possible. Your clean record gets you halfway across the board. All you need are invoices for good shippers.

3. Removes Risks from Delinquent Shippers

Top factoring companies for freight brokers offer non-recourse factoring to take away the risks with shippers who don’t meet the payment due date. While all factoring companies have recourse factoring, you should always opt for the non-recourse type. Here’s the difference between the two:

Recourse factoring has lower fees but holds you liable if your shippers don’t pay up. You’ll have to buy back invoices from your delinquent customers if the factoring company was unable to collect payment.

Non-recourse factoring, on the other hand, takes the risk off of you. You won’t have to worry about your shippers not paying up. Once they’ve bought your invoice you’re free from any obligations. The only caveat is that you’ll have to pay higher fees to compensate for the risks that the factoring company will take in your stead.

4. Guarantees Payments to Carriers

Compared to other forms of factoring, freight broker factoring pays drivers directly on your behalf. This helps takes a significant load off of you since you don’t have to worry about account payables as well, at least those involving your carriers. With fewer account payables and no account receivables to worry about, you get to focus more on growing your business.

When the freight factoring company pays you 90%, they’ll deduct a portion to pay for the carrier. It’s a win-win situation since they get to cover their own business from possible issues in the future.

Carriers need prompt payment as soon as you receive payment for your invoices. In case carrier payment delays happen, carriers could file a lien against the payment. Lawsuits like this can significantly interfere with the factoring company’s business operations.

Freight Broker Companies Need Factoring to Boost Their Growth

Don’t get bogged down by sluggish cash flow due to long payment cycles. Join other freight broker companies who had a good head start by applying for freight factoring services.