It’s possible to make a lot of money operating a freight brokerage. Even though working as a freight broker can be highly financially lucrative, this line of work can also be challenging for others. Especially considering that the drivers rely on you to pay them as promptly as possible. Also, most of the time, your customers will make you wait anywhere from 30 to 60 days before they pay you.
You are facing a difficult situation. Your customers want to pay you slowly, while your drivers wish you pay their money as rapidly as possible. The calculations don’t add up. Paying your drivers is difficult unless you have a cash reserve in the bank. And making an application for financing through a bank won’t get you far. Your credit history is always considered when a bank decides to lend you money. What if you are a freight broker starting or growing your business?
Financing your freight costs through freight broker factoring is a better solution than any other alternative. You will receive prompt payment for your freight bills through freight factoring, which will give you the means to cover all of your business expenses, including, most importantly, your drivers.
The primary condition for certification is that you must conduct business with customers with good credit and pay on time. In addition to this, in contrast to commercial loans, freight factoring is simple to secure. When deciding whether or not to give you credit, banks will typically look at your background, but factoring companies are more concerned about your future potential.
When you factor in your freight invoices as a freight broker, the process may vary slightly from how it is done by typical factoring companies. Since timely payment of your drivers is crucial, most contributing components will work together with you to find a solution to this problem. Others might even pay your drivers on your behalf, which would greatly aid you while handling responsibilities in the back office. The following is how the freight broker factoring process works:
1. Once the freight has been delivered, you are responsible for sending the factor copies of the relevant documentation.
2. The factor will pay you an advance of up to one hundred percent of the freight bill (minus the fee).
3. You will have quick access to the funds, whereas the factor would have to wait to be reimbursed.
4. The transaction is considered settled once the customer has made their payment.
Factoring is easier to obtain than a business bank loan. When you have more outstanding invoices, you become eligible for a more significant amount of financing. In addition, unlike business loans, factoring funding expands together with your company as it succeeds.