Every trucking company needs capital to maintain and grow operations. In the trucking industry, fleet owners rely on loans for everything from working capital, to smooth out uneven revenue cycles, and to expand their companies. However, freight factoring can also be used for those same functions, though it offers some advantages that traditional loans do not.
This one if fairly obvious. When a trucking company takes out a loan, they also take on debt. Depending on the terms of the loan agreement, trucking companies can spend months or years paying off the balance with interest. Freight factoring, on the other hand, doesn’t place any debt on the books because the transaction of submitting unpaid receivables for cash is simple and transparent.
All loans have scheduled payments with built-in penalties if a payment is late. This means trucking companies need to set aside a portion of their revenue to repay loans. If a revenue cycle is uneven and the money isn’t there to make a payment, trucking companies usually opt for short-term loans to smooth things out. Freight factoring is very different from loans. There are no scheduled payments and no penalties. Freight factoring is designed to improve cash flow and smooth out uneven revenue cycles. The only timeline trucking companies need to know is that freight factoring delivers cash for receivables within 24 hours.
While loans are typically the “go to” method for funding growth projects, they also limit growth potential. Taking out a loan impacts credit ratings and a portion of post-growth revenue still has to pay off the balance in addition to upscaled operational expenses. By contrast, freight factoring improves cash flow so trucking companies can build up capital reserves for growth projects and reduce the need for debt-based loans.
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Express Freight Finance is a national leader in freight factoring. Our fast delivery of cash for receivables, our tools which trucking companies can use to manage their accounts, and the ability to check the creditworthiness of your clients ahead of time make us the preferred freight factoring company in the trucking industry. Supercharge your cash flow and contact Express Freight Finance today.