Many businesses today are based on not selling a product, but providing transportation services to other companies and businesses. How do these companies make their profits? Invoice funding. A client company will rent a carrier’s trucks and similar vehicles to deliver items, and will be charged an invoice for the services rendered. Typically, invoices are paid within 30 to 60 days, but the bad news is that sometimes clients are late paying the invoices sent to them by carrier companies. In fact, about 60% of all invoices are paid late, and that is an issue because carriers have their own expenses to deal with, and they often cannot afford to wait that long to get the invoice payments. This is especially true for smaller, newer companies that do not have large sums of money to fall back on in an emergency, so another solution will be needed. That solution is invoice factoring services, and a newer business owner may wonder: “What is a factoring company?” or “What is an invoice advance loan?” The answers will make it clear that finding the top transportation factoring companies for the job can be a real boon for carrier companies, and indeed a lifesaver for newer, less wealthy carrier companies.
Carriers and Business
Appreciating the need for top transportation factoring companies starts with knowing the basic trends of the transport and carrier industry itself. Statistics shows that the American transportation network is home to around 12 million trucks, locomotives, rail cars, and sea vessels, all able to carry different goods across the United States or around the world, and the companies who own these vehicle will need to charge invoices for the clients who use them to transport various goods. Motor vehicles like trucks are especially common in this line of work; the Federal Motor Carrier Safety Administration believes that around 5.9 million commercial motor vehicle operators are working in the United States today, and they are spread out across many different carrier services, all of whom will need their invoice payments made in time. How does finding top transportation factoring companies a part of this?
The problem is that invoices are not always paid on time, and if a carrier company cannot find a solution to this, they could very well face bankruptcy. For this reason, finding and working with top transportation factoring companies is the way out of this issue and the path to more steady cash flow so that everyone walks away satisfied. In short, a factoring company is one that will “buy” the carrier’s rights to the invoice in exchange for giving a considerable invoice loan to that client carrier company.
When a carrier lends its services and they issue an invoice, the customer is unlikely to pay it immediately, or even on time. But while the clock is ticking, the carrier company has expenses of its own, from paying its employees to rent for its buildings to maintenance and fuel for its trucks, among other things, and this can be a problem. The solution is reaching out to top transportation factoring companies available and working with them as a client. Here, the factoring company will, if the client’s business credit is good enough, give a loan to the client company worth anything from 70% to 90% of the invoice’s value right away, and when the invoice is paid, the factoring company received 100% of the invoice’s value, and they will pay the client company another small percentage of the value. A few percentage points of the invoice’s value are left over, and the factoring company keeps this as its payment, which is the source of its profits. In this sense, a client company sacrifices about 2% to 10% of its total invoice value in order to get a large percentage of the invoice’s value right away, and this is critical for handling urgent expenses like fuel and the payroll. Giving up a small fraction of the invoice will, in nearly every case, be well worth the benefit of getting the money much sooner. However, companies should make sure that their business credit score is solid (it runs from 0 to 100), or they may viewed as unreliable and factoring companies may be unwilling to work with them.