Transporting goods from one to another is a costly process. Every year, manufacturing companies pay a lot of money to the trucking companies for transporting their goods to a specific destination, within the specified period.
Sometimes the payment amount is quite high, and it becomes tough for the client to settle the bills with the trucking company. Clients usually take more than 3 months to prepare the invoice and hence they delay in making the payment. This increases the credit risks for the transportation company.
By hiring the services of a factoring company such you can easily control the credit risks. For example, Pay4freight is a top freight factoring company which has been offering urgent funding solutions to their clients. You will need to make sure that you take financial assistance only from trusted factoring services like them.
Factoring and its two types
Factoring is the process, where the clients can sell their receivables to the factoring company at a discounted rate. In returns, the company will make the payment to the transportation company. Later, factoring company will collect the money from that particular client, who has sold the receivable to them.
Factoring can be of two types- recourse and non-recourse factoring. In recourse method, the concerned transportation factoring company will take all the risks, and it will later collect the money from the customers or the clients. Factoring companies offer some discount, which is dependent on how quick they want the funds.
However, in non-recourse factoring, the concerned factoring company will take the risk and make necessary discount in the payment. In case, the client does not make the payment, the factoring company will bear all the losses.
How to sell receivables to transportation factoring company
The process of selling the receivables can be done instantly. The clients who prefer to opt for this service needs to fill in an application form. Along with the form, they also need to submit a copy of all the relevant documents that will help the company in processing the form.
The copies of documents that has to be submitted to the factoring companies are listed below-
- Driving license
- Insurance certificate of the cargo
- Filed organization documents
- FMCSA Authority letter
After you have submitted your required documents, the factoring company will verify the details, and will check if you have applied for fund recovery elsewhere as well. You need to pay a sum of $100 for the verification process.
Things considered by the factoring companies while they receive the application
After the verification process is completed, factoring companies will ask for the invoice. They will not consider the invoice, until and unless it is duly signed and stamped by the customer or the client.
Finally, after considering all the risks, the factoring company will provide the funds to the transportation company. The discount amount depends upon the immediate requirement of your funds.
As soon as the formalities are completed, the funds are released to the applicants account within 1-5 days. They grant a total of 95 percent of the bill amount. The fund is either dropped directly to your bank account in the form of cash, or it can be collected via check.
Robert Beard has written this article. Pay4freight is a top freight factoring company and they have been helping many trucking companies in managing their everyday funding requirements. Visit their website for more info.