Psst… wanna know the secret to being a better truck driver? We got the hookup. Check out what this fellow truck driver has to spill about the job.
A government proposed speed cap will become effective Nov. 7, which will limit the speeds of trucks and buses weighing over 26,000 to 60, 65, or 68 mph on highways. The purpose of the cap is to reduce the number of yearly car-truck accidents. Regulators argue that the cap will reduce the number of mortalities in these types of accidents because the impact of the crash will be less severe if the truck is moving slower.
Many accidents involving trucks, however, are caused by cars rear ending slow moving trucks in the left lane. Truck drivers argue that the speed cap will just increase the number of rear endings because people passing in the left lane will not have time to slow down to make up for the speed difference. The National Traffic Safety Administration, on the other hand, argue that up to 500 lives would be saved if the speed were limited to 60 mph.
Independent truckers are concerned that the cap will only benefit big trucking companies at the expense of independent operators who need to cover more ground each day. While the cap could potentially reduce the number of deaths caused by truck-car accidents, the downsides are evident to truck drivers.
If you are an experienced commercial driver, you are well accustomed to the ways of the road. If you’re thinking about getting your CDL, remember to read up on safety tips so you know what to expect when you’re driving. Driving a truck is far different than driving a car, so make sure you know what kinds of adjustments you have to make.
What is Factoring?
This is an agreement whereby a business sells its accounts receivable to a third party monetary company. This third party company is also referred to as a factor. The reason behind this is to enable the business to acquire cash faster than it would by waiting 30 to 50 days for a customer payment. Factoring is also known as accounts receivable financing. However, factoring is not a loan because debts are not accumulated during factoring.
Difference between Factoring and a Traditional Bank Loan
- Factoring takes into account your customer’s credit strength. This is why you can qualify for factoring despite having a low credit score. However, qualifying for a bank loan demands an analysis of the company’s finances, assets and credit history.
- Factoring takes less than a week to set up an account while a loan on the other hand takes even up to two months.
- The amount of money that you are able to finance increases as your receivables increase with a limit restriction.
- In factoring, the rates can be changed as you continue to finance more money. In a bank loan, the annual percentage rate is fixed.
Which Factoring Options are Available?
The factoring options available are recourse and non-recourse. Both of them refer to the party that takes on the risk of payment. A recourse agreement means that you are accountable for buying back the invoice from the third party company if the customer does not pay it for any reason.
On the contrary, a non-recourse agreement means that the third party company will take the loss if the customer does not manage to pay the invoice because of financial complications.
Truck Factoring with Non-recourse
This factoring option sounds tempting from a risk analysis angle. Not every factoring company takes on non-recourse accounts. The ones that do not provide non-recourse factoring normally have various preconditions. Non-recourse factoring is more costly compared to recourse factoring.
Additionally, non-recourse factoring is specifically limited to debtors who are possibly going to pay. In case the debtor has a bad credit history, the third party company will not take on the risk of non-payment. Furthermore, non-recourse factoring does not essentially safeguard your company from any risk of non-payment. Most companies give a non-recourse that applies only when a debtor is bankrupt.
Benefits of Truck Factoring with Non-recourse
You will still receive the money you require, even if your customers don’t pay
Non-paying customers are a liability to any business. With non-recourse freight factoring, the factoring firm takes on all the risks associated with non-payment so that you can retain your working capital.
You will constantly know what you are paying for
When it comes to non-recourse factoring there are no hidden costs. The flat price prohibits you from paying extra regardless of duration of time your freight bill stays open. This means that you can easily combine your factoring expenses with your operating financial plan.
You will be able to save money
Many freight factoring companies offer cut-throat industry low rates for the non-recourse factoring. This means that you will have more money on hand without increasing your debt and without restrictions on how to spend the cash.
Top of Form
If you run your own trucking business, then you might be painfully aware of the fact that a lot of cash is required on a daily basis to pay fuel bills, drivers’ salaries, routine maintenance and repair bills and your other employees’ salaries. Since most of your clients could be paying you after a period of 30 days, meeting these routine expenses could pose a serious challenge to the growth and survival of your trucking company.
In such a case, you might wish for money in your hand, whenever you need to pay for your routine and even unexpected expenses, such as sudden repair bills or tire replacement bills. You could apply for a bank loan, in order to take care of such expenses. But, if you have just entered the trucking business, then banks would impose restrictions in the form of collateral or guarantors, in order to secure themselves against a bad loan. You might also need to provide your audited financial statements for the previous 3 years showing your profit figures, which would not be possible, if you were new to this line. You would have to repay the loan along with interest in the form of regular monthly installments for a fixed time, failing which the bank could take possession of the collateral offered by you, while availing the loan.
This unique need has created a financial tool known as freight factoring. Freight factoring companies offer you immediate cash against your credit invoices after deducting a factoring fee. They purchase your credit invoice and wire you the invoice amount after deducting a factoring fee of around 1.5% to 5%. This fee will be based upon the business that you generate for your factoring company, the number of days that you have extended to your credit clients and the credit rating in the eyes of your factoring company.
The factoring company might also retain another 5% to 10% of the invoice amount as security, although this would depend on the arrangement that you have with your factoring company. This means that instead of a fixed amount, you can get varied amounts at regular intervals depending on the amount of invoices that you have factored with the company. Thus, as your business grows, you might submit larger invoices to the factoring company, which in turn will provide fatter funds for your business.
Freight factoring will first and foremost help your trucking company by providing instant money without going through the hassles of providing collateral or audited documents. This money will immediately improve your cash flow and enable you to clear your daily bills such as fuel bills, drivers’ and other employees’ salaries, truck servicing and other repair bills, etc. Freight factoring will also enable you to take on new hauls, which previously would have seemed impossible due to shortage of funds. Freight factoring companies can also take over your receivables by collecting your payments from your clients on the due date, albeit at an additional fee. This too will enable you to divert your energy towards increasing sales rather than running after erring clients.
Thus, freight factoring can walk hand-in-hand with your trucking business and the money that is provided by such companies can help you to meet your expenses, take on new clients and larger hauls and even plan an expansion. Flexibility is the key in freight factoring and once you avail freight factoring services, your trucking business might easily reach from point ‘A’ to point ‘B’ without any hiccups.
If you are transferring loads across the city or across the continent, you are familiar with the issues you can face on an every day basis, with respect to covering your working capital requirements. Freight factoring can assist easing some of those problems, regarding the aspects of covering the costs of paying for petroleum, insurances, upholding, licenses and tolls.
Most of you are required to pay this operating cost if not every day, then for certainly on a weekly basis, and when you are gathering your statements after a 30, 40 or even 50 day cycle, this can make a cash resist, while you wait to get remunerated.
In that case, freight factoring can be a real pressure reliever so you can cover these expenses and have small cash left over for other things, while you wait to acquire payments from the client. There are, on the other hand, many companies out there that can factor your bills, but what are the things that you should look for when considering submitting your statement for freight factoring?
Does the finance company appreciate your commerce?
You are required to be certain that the company you are going to associate with understands the requirements of your business. If they will not take the time to understand your commerce and what’s important for your business, how can they work with you on an every day basis, to make sure there are no breaks in your working capital?
Will you be capable to get in touch with the freight factoring company when you require to?
If the need arises, will you have somebody accessible to speak with you regarding your account or will you have to wait days for a reply? Will you have a devoted person for your account, or will you be dealing with a call center? Either alternative can be well, but you require being relaxed with what you will be dealing with.
How much time it takes to have your statements processed so that you can acquire your invoices factored?
Some corporations may take up to a week for the dealing out with your statement to be capable to fund them. Are you willing to stay that long and wait for it, or do you required to have the funding right away? It’s an important question that can arise, as you can also wait for the client to pay, and sometimes, the client can pay sooner than the alternative.
Does the freight-factoring corporation you are considering to employ have the financial ability to fund your business without interruption?
It is intelligent to be certain that the freight factoring company has the backing to fund you when needed and not create issues for you, with respect to having to stay and wait for funding (having the bills paid) as their funds have been utilized.
Is the advance rate satisfactory for your requirements?
Usually speaking, funding levels can vary from 50% of the statement value up to 80% of the statement value, and you need to be certain what you require previously to making your option of which business to employ.
You might have noticed that cost was not in the top things to identify regarding freight factoring. While this is significant, pricing is NOT the most significant. While you do not desire to overpay for this type service, going with a negotiable basic cost may have other costs with respect to service that far offset the advantage of a small cost. Cost is significant, but Service is far more significant. Be certain that the service you required is assured and then look at cost and make your choice.
Therefore, if you want the services of a freight factoring company, you must consider the entire above factors. Beside these factors, you must also consider the rates factor, because it will finally affect your economics conditions. In this new light, always try to choose the most affordable and best company for your needs.