Freight Broker Financing Options

Freight Broker Financing Options



Freight Broker Financing Options
Owing a​ freight brokerage business can be very rewarding and profitable .​
But as​ a​ freight broker, you know that your business is​ very cash intensive .​
Your drivers depend on you to​ be paid on time .​
However, clients can take up to​ 60 days to​ pay for their loads.
So you end up caught in​ the middle .​
Caught between drivers that need cash now and clients that want to​ pay slowly .​
The math does not work .​
And unless you have a​ nice cash cushion in​ the bank, something has to​ give.
Trying to​ get a​ business loan won’t help .​
Banks only give business loans to​ companies that have a​ great history and solid track record .​
But what if​ your track record isn’t great or​ if​ you are a​ startup? What if​ you have no history but have a​ great future potential? If that is​ your situation, your financing will need to​ come from another source- a​ factoring company.
Factoring companies are experts at​ financing businesses with little past history but great future prospects .​
Basically, the factor eliminates the 30 to​ 60 days it​ takes to​ get your freight bills paid .​
With factoring, you get your freight bills paid in​ about 2 days .​
That gives you the cash you need to​ pay drivers and meet other business expenses.
Factoring is​ flexible and grows with your company .​
As opposed to​ having arbitrary limits like business loans or​ lines of​ credit, factoring limits are driven by your sales .​
The more you sell, the more financing you qualify for.
Here is​ how factoring works:
1 .​
You submit a​ copy of​ your freight bills to​ the factoring company
2 .​
The factor advances you between 90% to​ 98% of​ your freight bills (sometimes they hold a​ small reserve)
3 .​
Your get immediate use of​ the funds .​
The factor waits to​ get paid.
4 .​
If the factor held a​ reserve, the reserve is​ rebated as​ soon as​ your customer pays the freight bill
Factoring costs are driven by three variables: a) monthly financed volume, b) your customer credit worthiness and, c) how long the freight bill goes unpaid .​
As a​ rule of​ thumb, rates go between 1.6% to​ 3% per month, depending on these variables.
Factoring freight brokers is​ a​ specialty type of​ factoring and not all factoring companies offer it .​
However, those that do will help you succeed beyond your expectations.




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