Is freight factoring only about an informal loan? Yes, in the strict business sense, it is so; truck factoring is a means for truck owners to obtain funds. But, this basic need can be met by a regular bank, which with all its rigmarole can come up with a loan. However, needs of freight operators are so peculiar that, only a special purpose entity can provide the right kind of support.
Some of the established transport operators have formed Truck Factoring organizations; these offer tailor made solutions to truckers.
These companies meet the basic purpose of financing truckers’ operational expenses. The freight factoring company enrolls both shippers and truckers; when the truck owner, pick up a load from a registered shipper, he or she can get the freight bill discounted immediately. The common trade practice is that up to 90% of the bill is paid on the spot by the truck factoring company and the balance is released whenever the shipper settles the bill. The charges for the service will naturally be slightly higher than a bank, but then it will even out considering the convenience and transaction speed.
Now, to get additional benefits, you have to enroll with a dynamic freight factoring organization. These act as lead generators for business and reduce empty trips; you can check availability of loads from their website or call them up.
The outstanding benefit is lower insurance costs; since it deals on behalf of a number of people, the freight factoring company negotiates better rates from the insurance companies and takes care of the documentation.
If you talk to a truck factoring organization, you will find that there are several other services on offer.
