Common Misconceptions About Freight Factoring
Freight factoring is a service many trucking companies use to get paid faster. Instead of waiting a long time—sometimes up to 90 days—for customers to pay their invoices, companies sell their unpaid invoices to a factoring company like Elite to get cash right away. Although this can be a helpful tool for many businesses, there are a lot of misunderstandings about how it works. Let’s clear up some of the most common ones.
1. Freight Factoring is the Same as Taking Out a Loan
A lot of people think that factoring is just another type of loan, but that’s not true. When you factor an invoice, you’re not borrowing money; you’re selling the invoice for cash. This means you don’t have to worry about paying it back later with interest, like you would with a loan. Elite gives you the money upfront, and then they collect the balance due from your customer.
2. Only Struggling Companies Use Factoring
Another myth is that only companies in financial trouble use factoring. While it’s true that Elite can help companies with cash flow issues, many healthy and growing businesses use it too. Getting cash upfront lets companies reinvest in their business, take on more jobs, and grow without waiting for customers to pay their bills. It’s more about managing cash flow wisely than about fixing financial problems.
3. Factoring Costs Too Much
Some companies avoid factoring because they think it’s too expensive. While there is a fee, Elite only charges between 1.9-2.5% of the invoice amount. It’s important to think about what you get in return. The cost might be worth it if it helps you avoid missing out on opportunities or struggling to pay your bills. In many cases, the benefits of having steady cash flow outweigh the cost of factoring.
4. Factoring is Complicated and Takes a Lot of Time
Many believe that the factoring process is complicated, but it’s usually pretty simple once you’re set up. We offer an app where you can submit invoices and get paid quickly. While the initial setup takes a little time, after that, the process becomes routine and easy to manage.
5. Factoring Will Upset Your Customers
Some businesses worry that involving a factoring company will upset their customers or make them think the business is in trouble. But most reputable factoring companies handle collections professionally, and many customers are already familiar with how freight factoring works. In fact, most customers don’t even see it as a problem.
6. You Lose Control of Your Business
There’s a fear that using a factoring service means giving up control of your business. But that’s not true. Even though Elite handles the collections, you still decide which invoices to factor and how to run your business. Factoring just gives you more financial flexibility to make the best decisions for your company.
7. Only Big Companies Benefit from Factoring
Another common myth is that only large trucking companies can benefit from factoring. In reality, smaller companies often find factoring even more helpful because they might not have as many financing options as bigger companies. Factoring can help smaller businesses keep things running smoothly and compete with larger companies.
In conclusion, freight factoring can be a great tool for trucking companies to manage their cash flow and grow their business. By understanding the truth behind these common misconceptions, you can decide if factoring with Elite is the right choice for your company. When used correctly, factoring can provide the financial flexibility you need to succeed in the competitive world of logistics.