Trucking factoring can be a boon or a bane and tragically the distinction between them mean success or failure for your trucking business. Finding an appropriate factoring partner is a daunting task. However, it is simple to pick the companies that are the ones to keep away from. While searching for a factoring firm to factor your trucking invoices, you ought to remember a couple of things in your mind. Read this short write up where the aspect of Recourse Factoring explained in an easy manner. Those who wish to more statistical information can browse the website https://fci.nl/en/about-factoring/statistics to enlighten further.
What is truck factoring?
In an ideal situation, you would get paid for the trucking services as soon as you complete the task. However, in a real world, we do not receive the payment immediately. Things become more difficult for the trucking companies in meeting their expenses such as insurance, fuel, salaries and other incidental expenses. Such a situation creates a big hassle for your business and may even jeopardize the business growth. It is here, the concept of truck factoring comes very handy for the truck operators like you.
Trucking companies can always enjoy and stay productive through freight invoice or truck factoring. Factoring firms pay cash to the truck operators in advance and in turn, exchange their invoices that are to be cleared by the client companies. This unique transaction offers a great peace of mind to the truck operating companies. Truck operators need not worry about their cash-flow as they get the payment immediately and need not depend on the credit period enjoyed by their clients.
Truck invoice factoring
The term ‘invoice factoring ‘simply means a short term lending of money against the open invoices as collateral. Factoring firms receive such invoices and pay the money to the truck operators within few hours. Since trucking activity is a cash intensive business, truck operators cannot wait for long period of 30 days and above as they need to pay salaries, fuel charges and so on. The factoring companies charge these operators some commission to the tune of 1% to 8% depending on the agreed terms. Factoring firms (factors) later collect the payment from the clients. Though these transactions, factors make a good profit as this activity do not involve any big labor force or infrastructure. These firms just make an initial investment, but carry to carry some element of risk, which is normal for any business.
Recourse and Non-Recourse
These two terms are important for you in dealing with the invoice factoring. In the case of recourse, a factor can demand the loan back from the truck operator if the client does not pay the invoice as per the agreed time. On the other hand, with the non-course agreement, the factor takes the entire responsibility and will not bother the truck operator even if the invoice is never paid. Since this type carries more risk, the factor charges higher fees.
As a bottom line , the concept of invoice factoring helps the truck operators with a better cash flow, so that the same can be used to expand the business.