Advance business capital factoring is a great way for the trucking and transport industries to maintain a positive cash flow, pay off unexpected bills, and get essential repairs or purchases. Freight factoring services are a boon to small businesses, which account for 99.7% of all the business that’s done in America these days. This makes it all the more sad that there are a number of myths flying around about advance business capital factoring and how it works. Here are some of those myths:
- Factoring is factoring. In other words, all commercial factoring companies are the same. In reality, there can be a lot of difference in terms of customer service, agreements and contracts, and the use of technology. The factoring industry is no different from any other: some companies are better and more reliable than other companies. It’s important to work with companies that will be flexible with contract terms and who are more interested in long-term relationships than with making the quickest buck.
- It would be cheaper to just take out a bank loan. Again, this may or may not be true, depending on who is doing the advance business capital factoring. Some companies will certainly have excessive fees. Most good invoice factoring companies, though, know that they have to stay competitive with bank loans and are interested in making genuinely good offers and attracting plenty of business. To get the right factoring financing, you just have to put in a little time and effort to find the right company and rate.
- It’s going to be all or nothing.There are a few companies that will only work with you if you’re willing to factor absolutely all your invoices, but this is usually not necessary. Most factoring interests will certainly want to know that they’ll be getting a regular flow of invoices from your business, but they won’t be forcing you to factor every one. This means that you can choose direct payment from shippers who pay immediately while factoring invoices for those who delay payment by weeks or even months.
- Factoring is only for start-ups.Factoring can work for anyone. One of the best benefits of advance business capital factoring is that it does away with a lot of the difficult and time-consuming loan approval process of a traditional bank loan. And, unlike a bank loan, you can scale up with factoring to match the steady growth of your company, factoring more and more invoices as you like. This makes it an attractive option for more than just start ups.
- Factoring companies will harass your customers.Again, as with any field of industry, there are good businesses and bad ones. A reputable factoring company will not risk long-term relationships and steady income for the brief satisfaction of harassing a client for early payment.
- Advance business capital factoring is only for failing companies. While it’s true that some companies with poor credit come to factoring services for cash flow, this doesn’t mean that invoice factoring services are just for dying companies. Factoring is concerned primarily with the creditworthiness of a shipping company’s clients, not the shipping company itself, so it comes as no surprise that it’s fairly easy for the shipping company to get approval.
The goal of advance business capital factoring is to keep your shipping company healthy. The stronger a company, the more business will be profitable for everyone involved. In any industry, there are some shady operators who are more interested in a quick buck than in long-term profit and sustainability, but it just takes a little research to dig out the reputation of any factoring financing service you’re interested in doing business with.
Once you have found the right company, consider doing business with them. A study by U.S. Bank found that 82% of all businesses that fail go under because of problems with cash flow, and considering that 60% of shipping invoices get paid late, the possibility of cash flow issues for trucking is serious. You can avoid that and maintain that positive cash flow with the right advance business capital factoring.