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3 TIPS YOU NEED TO CONSIDER BEFORE CHOOSING THE BEST FACTORING COMPANY
Selecting the Factoring company is one of the most important decisions you need to take in your trucking business, and in this article, you will be able to know the 3 tips you need to have before selecting the right factoring company.
Let's start to understand what is a factoring company and why you need one.
The factoring companies specialize in financing invoices (i.e., accounts receivable). They offer this service because many small and midsize companies cannot afford to wait for the usual 30 to 60 days it takes to get paid.
Companies need the funds sooner to pay for ongoing business expenses such as suppliers, payroll, rent, and so on. Factors provide two services that work together: credit reviews and accounts receivable financing. The factor reviews the credit of your commercial customers to determine if they deserve 30- to 60-day terms. This review enables you to offer credit only to customers who will pay according to terms. Invoices due from customers with good credit can be financed through the factoring company. This service improves your company’s cash flow.
Also, not every company or owner-operator uses factoring for the same reason. Sure, cash flow assistance is a significant benefit for almost all who participate, but some larger companies are more concerned with overall growth. others, they merely lack the capabilities or manpower (either permanently or temporarily) to manage all the communication and payment collections that go along with multi-truck freighting.
If you haven’t done billing and collecting in the industry, a factoring company can take that back office task over for you in the industry, if you don’t have systems in place to credit check your customer, you are susceptible to higher risk on top of that, there are a staggering number of new trucking companies being formed every year, and it can be challenging for them to get financing the old-fashioned way (i.e., from a bank). factoring, in many cases, is the only way they can get up enough cash flow to run for more than a few months.
Now, that you have a general understanding of factoring, let's move forward on the 3 things you need to check before choosing a factoring company.
1. The Services
There are many factoring companies outside telling you they offer the best service, but before knowing this, keep in mind what kind of added value they have, check if they only do factoring or if they also help you with certain decisions in your business, this is very important, because more than choosing a factoring company to collect your payments, you are about to make a financial decision with a financial ally, so, you can see in the industry those companies that offer you a mentoring services, where they advise you step by step how to run a trucking business and be profitable over time, and trust me, you will be very grateful for that service.
2. Factoring Rates
A factoring company should be able to give you a price estimate after you provide it with some basic information. On average, factoring rates range from 1.15% to 3.5% per 30 days. Prices below 1.15% are usually for terms less than 30 days, or they may have other undisclosed costs.
Unfortunately, some factoring companies advertise their prices in a way that makes it difficult to determine the cost of the service. Be careful of extremely cheap rates, as they may have hidden costs attached.
3. The Experience
The experience of a business is crucial for the whole understanding of the industry, if you know a factoring company that could achieve enough experience during the time, its longevity will tell you that they have the long-term experience necessary to manage accounts during different economic circumstances like recessions, pandemics, political decisions, etc. If you think about it, it is difficult to be too good at something while you are also new at it.
So, now that you know which point consider, the next step will be to choose the right one, it is recommended to consider at least 2 options to make a comparison.
Consider also, that most factoring companies can set up an account for you in 3 to 5 business days. Larger accounts may take a few more days because of the additional due diligence. Unless you need the money urgently, account setup time should not be an important consideration when you examine factoring companies.
I hope you can be able to make the right selection, if you need the extra help of a company that could lead you to be successful over time and also factor your invoices, CBRT CAPITAL could be the right one for you, get an online Factoring Quote or call 469 596 6351
CBRT Capital was founded in 2021 with the purpose of providing working capital solutions for Hotshot and Power-Only Motor Carriers in the transportation industry. We are a newly formed company specializing in funding solutions for the trucking industry through capital freight factoring. CBRT Capital is an invoice factoring company that serves small and mid-sized trucking companies throughout the United States. We provide a flexible, entrepreneur approach to the working capital needs that our clients truly seek.