Even though receivables financing has been used by many industries as a financing solution for centuries, business owners have a lot of misconceptions about the process. We’ve busted some of the most common myths below; read on to discover how you can use freight factoring to help your business improve and grow.
Factoring contracts are too long.
While some freight factoring agreements may lock your company into a long-term, fixed-rate contract, reputable agencies offer more flexible arrangements. Most contracts are between 6-12 months, though even shorter agreements are available.
You must factor all of your invoices.
While a factors expect a certain volume of invoices each month, most freight factoring companies do not require all invoices to be factored. It is a sound strategy to factor invoices from clients who take longer to pay or which are a larger portion of your accounts receivable.
Only startups benefit from factoring.
Yes, freight factoring is a great way for startups to see quicker growth. But factoring is a proven strategy for more established and larger companies. They recognize that factoring is a flexible, fast and inexpensive method to secure capital without going through the approval process of a line of credit.
All factors are the same.
Like any industry, no two factoring companies operate in the same way. Some may offer better customer service while others are leaders in technology or offer lower rates. They do all share one common feature: they want to build solid relationships with their clients by offering competitive rates and services. It pays to research the industry to find a factor which best meets the needs of your company.
It’s too expensive.
Most factoring agreements are competitive with the rates offered through conventional bank loans. Some factors may offer better pricing, so shop around to find the best value.
Only failing business factor their invoices.
Factoring can be used by companies in distress, but factors also look for successful clients in growth mode. Many established and successful business choose freight factoring over lines of credit because they prefer the flexibility and ease of acquisition.