Factoring is a process that has been widely misunderstood by companies and CEOs everywhere. It also comes with its own stereotypes, but like many stereotypes, people who believe them are simply lacking key information. With freight factoring, there are quite a few myths out there that are still believed, causing companies to lack important funds to continue growing. In this blog, we will discuss what freight factoring is and we’ll break down some of the more common myths about the industry.
If you’re looking for a reliable factor company in the freight and trucking industry, Financial Carrier Services is here to help.
First, What is Factoring?
A factoring company is an organization that purchases invoices, or receivables, from another company. That company then collects the money on the invoices owed. This transaction becomes beneficial when company X is waiting on payment on an invoice from company Z. A third-party company, or a “factor,” will step in and pay the invoice on behalf of Z company, who will then need to pay the factoring company. At Financial Carrier Services, we are a factoring company that offers our services primarily to freight companies.
Common Myths Regarding Invoice Factoring
It’s a Last Resort
Even though factoring is a method of generating cash in times of need, a business does need to be in good financial standing in order for a factor to advance funds. When you work with Financial Carrier Services, we will analyze your current financial situation and determine if future potential is greater than current difficulties. Businesses of all types use this method to grow, not just those that are in the midst of a struggle.
Yes, when a company factors their invoices, a percentage of the invoice will go to the factoring company. And various factors will offer different rates. It is important to do your research and ask a potential company about their rates, contracts, or fees. However, this doesn’t mean that the service is expensive or not worth it. When done at the right time, and with the right company, it could be very beneficial.
It Changes Customer Perception
This goes along with the myth that factoring is a last resort. If your customers or vendors believe this, and they see that you are factoring their invoice, they may see this as a failure. Regardless of what they believe, nothing changes for them except who they are making the invoice payable to.
Factors Only Work With Established Companies
Many startup businesses, as well as much older businesses, use factoring in order to generate cash quickly and grow or simply because invoices aren’t being paid. On the other hand, factors will also decline your business for various reasons. At the end of the day, there are no standard rules across the industry for who a factor will and will not work with. If you’re interested in working with a freight factoring company, contact them and ask about their requirements.
Can’t Control the Invoices
Services are often on a case by case basis, and each situation will have its own processes and requirements. Overall, you will always be the owner of the invoice, and a factoring company simply wants to provide their services.
At Financial Carrier Services, we know the freight industry, so you can count on us to provide quality, reliable factoring services. We don’t require a contract and you can pull customer or vendor credit reports as often as needed. Above all, we want to help your company succeed, so that you and your employees can grow. If you have any questions about our specific services, processes, and requirements, get in touch with our team today!