Truck Factoring and High Fuel Prices
Shipping is vital to the economy. The shipping industry moves the goods produced by other industries across the world. Anything that affects shipping quickly affects all other industries. Rising costs are passed on to businesses through higher freight prices. Businesses then pass those higher freight rates on to consumers where possible, making goods more expensive. Higher shipping costs can be created by multiple factors, including increasing demand.
Freight companies like trucking businesses are hit hard by recessions and depressions. Rising fuel prices also take their toll. The purpose of a freight company is to move cargo from one location to another. They do this by buying cargo, moving it and reselling it, hopefully for a higher price. There is a necessary time delay between buying and reselling the freight. During tough times, this time delay can pose a threat to the survival of the business. Rising costs cut into profits, which cut into the ability to purchase and resell cargoes.
Trucking businesses can use truck factoring to help them maintain a positive cash flow. Trucking companies no longer have to wait for their customers to pay before they purchase their next load. Instead, they can sell their invoices to a factoring company at a discounted price. The discount rate varies depending on market conditions, but it generally stays within 5% to 10%. Truck factoring provides immediate cash with which trucking companies can purchase new loads.
Truck factoring is similar to a credit card company selling their debt to a collection agency. The dissimilarity is that the customers the factoring company “collects” from were likely to pay the trucking company. The problem was the time delay. The trucking company simply couldn’t wait long enough. Usually, all the factoring company has to do is wait for the customers to pay.
Truck factoring offers timely assistance for trucking companies that are feeling the pain of high fuel prices. Factoring ensures that they have the cash to meet their fuel needs and to continue buying new loads to haul. A truck has to drive to the location to pick up the load and then drive to the delivery point. This requires a lot of fuel. Pay4Freight.com offers fuel advances to meet this need. The rate for the advance is often included with the discount rate. Once the trucking company delivers the load, they pay the factoring company the agreed rate.