Nearly 12 million trucks, rail cars, locomotives, and vessels move goods over the transportation network. Commercial transportation requires a great amount of attention to detail, which is just one reason so many professionals have been relying on services from transportation factoring companies and other types of small business factoring. Invoice factoring is a type of accounts receivable financing that converts outstanding invoices due within 30, 60 or 90 days into immediate cash for your small business, and if you feel as though it could be a good fit for your business needs, it’s important to find the right provider for you.
Remember that not all invoice factoring companies offer the same services or programs, so it’s important to find the right company that meets your current needs before signing the contract.
Ask: What’s included in the invoice factoring fee?
It’s easy to assume that the invoice factoring company with the lowest fees wins. But, as an owner-operator, you know that just because something is cheaper, it doesn’t mean it’s better. You have to consider and understand what’s the behind the cost.
Some invoice factoring companies offer promotional discounts or have minimum requirements you have to meet each month to qualify for the lower fee. It’s important that before signing an invoice factoring contract that you read and then re-read your agreement to understand how it’s structured. Like most business contracts, there’s not a lot you can do once you’ve signed it.
Also, ask your factoring company what other back office solutions they help you with. Most factoring companies include additional services included in their fees. So, unlike a bank loan, you’re getting more than just money. You’re getting a team of trained professionals who work with brokers and shippers every day and understand the transportation business. That means that instead of being tied up on calls with brokers asking about payment on a load from three weeks ago, you’ve already been paid on that load, and your factoring company works on your behalf with the broker to make sure it’s paid.
According to a U.S. Bank study, 82 percent of businesses fail because of cash flow problems. Trucking companies can’t afford to be waiting for their money. You can’t afford to wait on payments from multiple brokers who might take 30 to 60 days to pay. Invoice factoring companies make sure that you’re paid and provides additional support with your clients.
Look at the business invoice factoring company’s reviews and overall reputation.
In addition to comparing rates and services, it’s also essential to try to access some direct feedback from satisfied (or not so satisfied) clients. This can give you a more realistic idea of what it’s like to communicate with and conduct business with the provider. If possible, try to find reviews and feedback that’s not directly from the company website — these are more likely to be filtered for positivity.
CAUTION: Not all reviews are going to give you the complete picture. You know as a business owner that public reviews can be misleading or not give all the details of a problem. Also, look at the total amount of reviews. If a company only has a handful of reviews, it may not give you a good sense of the company’s service and professionalism.
Reviews can be helpful, but also ask other drivers in the industry. Those referrals will probably give you a fairer review of their company.
Don’t wait until it’s too late
How big of a deal are late payments? It’s been estimated that if all invoices were paid on time, U.S. small businesses could collectively hire 2.1 million more employees, which would reduce unemployment by 27 percent.
What could you invest in your trucking business if you knew you were going to get paid within one to days instead of waiting a month or more? The right business factoring services can help you with your cash flow that will help your present and future business plans.