Discover the Truth: 4 Common Myths About Freight Factoring
Starting and growing a trucking business requires careful financial management. Many owner-operators and fleet owners find factoring to be an essential tool for managing cash flow. But there are some common misunderstandings about freight factoring that might cloud its actual benefits. Below we debunk the top myths about freight factoring:
Myth 1: Factoring is Expensive & Irreversible
Reality: Freight factoring is a flexible financial agreement that allows you to choose which invoices to factor and when to factor them. While there is a small fee to factor your loads, you don’t need to take on additional debt, unlike traditional loans. In addition, freight factoring contracts can also vary in length, giving you flexibility in determining how long you need financial support.
Myth 2: Factoring is Only for Businesses That Are Struggling
Reality: Factoring isn't just for struggling or startup trucking businesses; it's a valuable financial strategy for fleets of all sizes and stages. Whether a business is in its early stages, experiencing rapid growth, or aiming to steady their cash flow, factoring is a valuable resource.
Myth 3: Factoring is Only for Businesses That Have Bad Credit
Reality: Whether your credit score is high or low, you can access the financial support you need through freight factoring. Unlike traditional loans or lines of credit, freight factoring approval isn’t based on your credit, but the credit of your customers. This makes freight factoring one of the few financial solutions accessible to all carriers with varying credit scores.
Myth 4: Companies Make You Factor Every Load
Reality: While some factoring companies insist on a minimum number of loads that a carrier must factor each month, many others do not. Reputable freight factoring companies operate without any mandatory monthly minimums, allowing you to access a cash flow resource as and when you need it.
How To Avoid Non-Reputable Factoring Companies
Now that you understand how freight factoring is valuable for businesses of all sizes and stages, it's important to know how to pick a good, reputable factoring company. Too often, carriers overlook these five important things when choosing a factoring company and end up partnering with a non-reputable provider. This will ultimately lead to more frustrations, complications, and headaches for the carrier.
