What Are The Two Types Of Freight Factoring?

78461642_xsFreight factoring is a subdivision of “invoice factoring” or “commercial factoring.” In freight factoring services, trucking companies can sell their invoices or accounts receivables to a factoring firm. The factoring company gets the invoices and offers direct funds to the freight companies.

Now you can check in Google to pick the best online freight factoring service firms that are suitable to your requirement. The trucking industry of each country differs and also their trucking regulations. The website explains the guide to Australian trucking industry.

Any trucking company can select a freight factoring firm that identifies itself short of money to meet their expenses. Generally, in business, the customers can settle payments for the invoice for the services offered within 30-90 days period, but it is hard to meet business expenses within that time limit. The big difference between factoring and loan is you don’t want to pay any monthly interest, and the factoring company pays you a certain percentage of your invoice.

Factoring is the best option for start-up businesses that need to meet their business expenses to avoid short on money till their customers pay invoice amount. You will defiantly get some money that is helpful to ship your next load. You must say aware that factoring is expensive when compared to the other forms of lending. Before deciding about factoring option, you must know about two types of factoring and pick the best one for you.

The two factoring types are recourse and non-recourse factoring. In recourse type, you should buy back the invoices from the factoring company if your customer fails to pay the invoice amount within a specified period. Because of this, it is not a risky factoring option for the factoring firm. The benefit is that the cost will be low to the factoring company since there is less risk involved.

You can select this option only when you are sure about your customer’s ability to pay the invoices. The factoring firm’s give you better rates since they have the right to take legal action when their clients failed to pay the invoices within a period of time.

In Non-Recourse factoring, the factoring company has all responsibility for the bills once they purchase the invoices. Because of this, the factoring company has a higher risk, and the cost of the non-recourse factoring is expensive than the previous type. You don’t want to worry about buying the invoices later.

Non-Recourse Factoring type is the preferable option in the transportation industry. It is worth to spend some extra money in this cost rather than investing legal cost later in the recourse factoring type when your customers decline to pay. If you want just to sell your invoices, non-recourse factoring is the best option to pick.

You can perform credit checks on your customer, and the reports of credit check will give you deep insight about your customers. Also, this information will be very helpful when using recourse type. The main benefit of freight factoring option is it allows you to grow your business rather than stagnates because of a shortage of cash.