Financing Your Freight Brokerage Business the Easy Way!
Start freight brokerage
business, factoring company for transportation business, start freight forwarding company
It can make you or break you—that’s the type of business you are in!
We are talking about freight brokerage or trucking. Unless you know the
ropes thoroughly, you cannot expect to get good revenue from your business.
After all, the whole thing revolves round “hard cash”. You have to give
your clients some time to pay their dues; at the same time, the drivers
who work for you will demand that their salaries be paid on time. This
is a catch-22 situation, since you are caught between your clients and
your drivers. While some customers will give you money on time, others
might even request you to wait for two months. Therefore, your bank balance
has to remain healthy at all times.
Now, there are two options open to you to ensure that you always have
ready money in your bank—
(1) Provided that your track record so far has been without any blemishes,
banks will lend you money. Again, banks also research the past history
of your company before they part with business loans. If you are fairly
new to the business and have no history to show, wary bankers may not
agree to your request so quickly. And they are not really concerned about
the future potential of your business.
(2) So if not banks, who then? You will have to approach
factoring companies to help you sail through these difficult
times. Unlike banks, these financing companies are more concerned with
the future than with the past. They have more flexible terms and prosper
on parallel lines with you.
(3) The limit for the amount you can ask for depends on your sales. The
more you sell the more finances that you will receive from the factoring
companies. They are not governed by rules that apply to business loans
or lines of credit.
(4) The best part is that your factoring
company allows you to get rid of your freight bills within
two days. It also affords you enough cash to pay your drivers, as well
as clear other expenses concerned with your business. Thus, the time limit
of 30 to 60 days given to pay off freight bills is eliminated.
(5) Now, though there are many factoring companies,
all of them do not deal with factoring freight brokers; only some specialize
in it. So, you will have do a little bit of research and get hold of the
right companies; look for those that are cost effective. Once you get
such aid, you can expect your business to grow by leaps and bounds!
(6) The first thing you need to do when you find a company of your choice
is to submit copies of your freight bills.
(7) Once they finish perusing your bills, the company will advance you
90% to 98% of the money required to pay them off. At times, they may hold
a small reserve.
(8) In case a reserve is held, it is rebated as soon as your customer
parts with his cash.
(9) There are no conditions attached to this loan—you can make use of
the funds immediately. You can pay the factor later on.
(10) Finally, how does Invoice Factoring work? It depends on—your customer
credit worthiness; the duration of time for which the freight bill can
remain unpaid; and your monthly financed volume. Based on these variables,
the rates traverse between 1.6% to 3% each month.
