by Ashley Wilks
Nearly 80 percent of new trucking companies turn to factoring to help them steady their cash flow until they get established, which would indicate a certain amount of acceptance and trust of the partnership. But a certain amount of suspicion and wariness still holds on among some fleet owners when it comes to factoring.
The truth – partnering with the right factor is often the correct business decision that will allow your company to not only survive, but grow strong. Don’t let these common misconceptions about freight factoring keep your business from thriving.
1. It is too expensive.
Different companies will have different rates, different terms and even different services. Certainly any fleet owner contemplating a financial arrangement of any type should examine the options available and ask relevant questions. Factoring fees are generally competitive, but it certainly makes sense to compare rates among companies.
In the course of doing that research, consider all aspects of what a factoring company offers. Some charge for additional services that others provide free of charge. Some require a time commitment and charge a penalty fee if you end the relationship before that time.
2. Your business is in trouble if you need factoring.
A factoring company is just another way of financing, and is meant to ensure a steady cash flow. The funds that you receive are based solely on what customers already owe you. In reality, a factor can’t do much to help a company that is not generating business, since it is paying on accounts receivable.
Much more likely, the business is building, either because it is new or because it is taking on additional work and needs to invest in staff and/or equipment.
3. If you’ve seen one factoring company you’ve seen them all.
The basics of factoring are consistent. The factoring company buys your accounts receivable, charging a fee for the service; your trucking company get funds immediately and the factor collects on the invoice.
If you brought it down to those basics, one of your customers could easily say that all carriers are the same — they bring goods from shipper to receiver. Of course, there’s more to it than that.
Does the factoring company understand the trucking business? What kind of customer service do they provide? How reliable is their financial standing? What do other customers say about them?
It’s absolutely natural to sweat the details when you are making a financial decision for your trucking company. The best way to get past myths is to ask questions and get the facts.
Why Choose WEX Fleet One Factoring?
With 28 years of experience in trucking finance, we have established a long tradition of success. Let WEX Fleet One Factoring take on the risk, while you focus on growing your business.
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