If you’re not growing, you’re dying; it’s a common adage that’s well embraced by company owners in the trucking industry. Current economic conditions have fostered a surge in the industry that has led to greater profits and stiffer competition. When competing carriers embrace innovation and expand their fleet size to grab more customers and lanes, they threaten your business. Staying ahead by seeking out growth prospects and expanding your business is critical to sustainability. Freight factoring provides the financial leverage to expand your operations as you meet new opportunities.
Available capital is essential to expand a business. You will never be able to take your business further if all you are managing is to maintain enough cash flow to pay bills and driver salaries. Without the ability to grow, your trucking business becomes a grind. Servicing the few customers you do have and hauling whatever freight is acquired from load boards will be the extent of your enterprise. It is nearly impossible to expand most businesses without growth capital, either accumulated and saved over time or borrowed from the bank.
With average industry margins hovering around 5%, it is extremely difficult for freight carriers to accumulate and save growth capital. Acquiring a bank loan to fund expansion is equally as difficult without a strong operational history and balance sheet. Little is more frustrating to a truck company owner than lost opportunity due to a lack of resources. Fortunately, freight factoring companies provide funding solutions designed specifically to address the financial needs of freight carriers and brokers.
Maintaining positive cash flow
When transportation companies acquire new business they need to increase operational capacity to meet demand. This requires additional working capital
to support larger operating expenses, lease agreements for new equipment, plus repayment obligations if a bank loan has been acquired. Maintaining
positive cash flow becomes a greater challenge as these additional costs often come due well before customers remit payment. If not corrected, this
imbalance will result in your company reaching a cash-poor position that could become highly detrimental and could even spell the end of the business.
Freight factoring is a sound financial strategy to create and maintain positive cash flow. Instead of waiting 30 or 60 days for customers to pay their invoices, freight bill factoring provides payment within 24 hours of dropping a load. The more loads delivered, the more funds become instantly available as working capital. With this ability, transportation companies have unlimited potential for growth by staying ahead of the constant and cyclical expense of expansion.
Overcoming the Credit Barrier
One of the greatest barriers to expansion is credit limits imposed by the company’s lender. Traditional banks lend money based on the financial strength of your trucking business. This is contrary to your needs as your business needs money to build your financial strength. Freight factoring behaves in the exact opposite manner to a commercial bank loan: factoring companies judge your financial strength based on the credit worthiness of your customers. This opposing difference in funding policy makes all the difference for growing trucking companies. The more credit worthy your customers are, the higher your credit limit grows.
Additional Value Added Services
Trucking factoring companies provide an even larger advantage to busy freight carriers. To further assist your trucking company in its efforts to grow, freight factoring companies provide additional support services. A/R management, risk mitigating tools and fuel discount programs are just a few of the value added services available through industry leading freight factoring companies.
Whether your business is an establish operation with expansion plans, or a start-up company with just a few good customers, freight factoring is the ideal financial strategy to support future growth.