All the Good Things About Truck Factoring Companies
Running a trucking business can be very profitable, but this business can also become your downfall if you don’t have enough money to cover your operational costs. Unfortunately, the vast majority of small trucking companies rarely have big enough capital to cover their immediate expenses if they don’t get the payments from their clients right away.The main problem of these businesses is that they usually don’t get these payments, because they have to offer at least 30 days credit to their clients. As a result, you can be tight pressed for money, and your business will suffer because of it.
You can avoid this unpleasant predicament if you manage to find a reliable West Texas fleet factoring company. This firm can buy your invoices for a fraction of a price. This means that they will provide you with the money your client would have paid you in the end of the month. Factoring companies usually take about 5% of the total amount of your invoices as the payment for their services. Thus, getting financing from them is more beneficial than going to a bank, because the interest rates on a loan will definitely be higher.
Also, you should understand that factoring isn’t a loan. This means that it won’t influence your credit report. In fact, it will take a huge load off your shoulders, because you won’t have to pursue your clients to get the payments you are due. This obligation will be assumed by the factoring company once you hire them.
As you can see, your own credit score pays very little role in this business. Thus, factoring companies usually disregard it altogether. This is one of the many benefits of this financing option. However, your customers’ credit scores will be considered.
In case your clients aren’t able to fulfill their financial obligations, the factoring company will demand their money back. This can become a severe blow to your financial situation. Thus, you will need to make sure that your clients’ credit scores are good. The factoring company will double check this information before offering a contract to you. Thus, you can be denied their services if your clients aren’t trustworthy enough.
The vast majority of factoring companies offer year-long contracts. This works out very well usually, but if you are just starting your business with the firm, you should opt for a short-term contract. This way, you will get a chance to evaluate the quality of their services and determine whether you want to continue working with them in the future.