Going into debt when it comes to funding a freight company can be a harmful strategy, especially when the services of a freight factoring company can keep you solvent without borrowing money.
Just like older generations always instructed their children, stay out of debt. Any company should try to avoid borrowing as much as possible.
Why? For one, you are incurring extra costs in interest payments, payments that are not used to add staff or equipment or expand, but instead go straight to the bank.
Secondly, when you are highly leveraged in loans, a business places themselves in a tight situation when perhaps they do need a loan to make it through the next month with payroll, rent, supplies, utilities and everything necessary just to keep the doors open.
Third, taking on too much debt can hurt a credit rating. A credit rating is like a badge of honor for most businesses and affords you the terms you prefer. It gives you the opportunity to shop around different vendors who are all willing to do business with you when they see you pay your bills on time.
But there are times when trucking companies need cash quickly. Trucks need fuel. Drivers need payment. But invoices from brokers and shippers sometimes are slow coming in.
If you’ve done a good job of managing your receivables and landing credit-worthy customers, an invoice factoring company can step in, buy your receivables, and get you that cash right away.
But a freight factoring company does more than a bank. They will help monitor and manage your receivables to make sure your clients pay on time and your accounting department is using best practices to be sure those payments come in on time.
Once the funding is completed with a receivables factoring company, the arrangement can end, unlike a bank loan which can last for years and be a constant thorn in your operation.
Call a freight factoring company such as Gateway Business Credit. See what they can do for your company to keep you in the black and out of debt.