There are certain businesses which are known for a very slow payment cycle and it becomes easy for the business owners to be caught in the middle of the same. A slow payment cycle means the receivables take a long time to be recovered while having to handle the business operations with adequate cash flow and also making the payment of short term liabilities without a default.
There are a lot of freight brokers who get caught up due to a slow payment cycle and they need to make payment to the carriers. The shippers who take a lot of time for the payment pose a challenge when it comes to the carries. If you wait for them to make the payment, you could bring your business to a halt. This is why you need to consider freight broker factoring. It is an ideal way to overcome the slow paying clients and to ensure that the freight brokerage has the necessary cash to keep the business running.
Advantages of freight broker factoring
- The biggest advantage of factoring is filling the gap between making payment to the carriers and receiving the payment for loads. The payment cycle needs to continue and with factoring, you will be able to make payment to the carriers when they deliver the load. There will be no delay in the delivery of the goods and you will be able to operate the business without worrying about the absence of funds.
- Another advantage of factoring is the low fees. If you compare factoring with the traditional form of borrowing, you will realize that factoring is a cost effective alternative. The factoring company will charge a small fee for the service but the fees will be much lower than the amount you would have paid in the form of processing fees of the loan and the interest payable thereafter. You need to consider the cost of borrowing when making an application and it is best to choose an option which has the minimal cost. Factoring only has a certain fee which is lower than all other alternatives.
- Lastly, with factoring, you can make a huge improvement to the cash flow. You can make the most of the instant pay discounts offered by the carriers and ensure that there is sufficient cash flow with you to make timely payment of rent and salaries. Your cash flow will remain robust and you will be able to take decisions that help the business grow.
Freight broker factoring is ideal for those operators who wish to continue to expand their business without having to wait for the payment to be cleared. It is a wise decision to use the invoices to raise funds and to make short term payments so that the business does not come to a halt. The entire process of factoring is quick and hassle free. The purpose is to receive an advance for the work completed before time and at a low cost.