Owing a freight brokerage business can be very rewarding and profitable. But as a freight broker, you know that your business is very cash intensive. Your drivers depend on you to be paid on time. However, clients can take up to 60 days to pay for their loads.
So you end up caught in the middle. Caught between drivers that need cash now and clients that want to pay slowly. The math does not work. And unless you have a nice cash cushion in the bank, something has to give.
Trying to get a business loan won’t help. Banks only give business loans to companies that have a great history and solid track record. But what if your track record isn’t great or if you are a startup? What if you have no history but have a great future potential? If that is your situation, your financing will need to come from another source- a factoring company.
Factoring companies are experts at financing businesses with little past history but great future prospects. Basically, the factor eliminates the 30 to 60 days it takes to get your freight bills paid. With factoring, you get your freight bills paid in about 2 days. That gives you the cash you need to pay drivers and meet other business expenses.
Factoring is flexible and grows with your company. As opposed to having arbitrary limits like business loans or lines of credit, factoring limits are driven by your sales. The more you sell, the more financing you qualify for.
Here is how factoring works:
1. You submit a copy of your freight bills to the factoring company
2. The factor advances you between 90% to 98% of your freight bills (sometimes they hold a small reserve)
3. Your get immediate use of the funds. The factor waits to get paid.
4. If the factor held a reserve, the reserve is rebated as soon as your customer pays the freight bill
Factoring costs are driven by three variables: a) monthly financed volume, b) your customer credit worthiness and, c) how long the freight bill goes unpaid. As a rule of thumb, rates go between 1.6% to 3% per month, depending on these variables.
Factoring freight brokers is a specialty type of factoring and not all factoring companies offer it. However, those that do will help you succeed beyond your expectations.
Saturday, May 3, 2008
Freight Logistics
Logistics is defined as possessing the right amount of substance at the correct time and for the appropriate price. It is a discipline, which deals with the procedure of any organization and has operational and financial impact. It fits in with all types of industry segments, and administers the completion of project life cycles, supply chains, and ensuing efficiencies. Freight logistics involves working with experts who merge expertise in freight transport with focused knowledge of certain industrial sectors.
In the current scenario, logistics and supply chain matters are more important than ever before and have accomplished greater eminence within business circles. Several freight companies have got into joint ventures with companies that are focused in a sector, to achieve optimization of their services. There are several firms that grant outsourced or "third party" freight logistics services to companies. These providers are specialized in warehousing and shipping services are incorporated into their systems. This can be modeled to the needs of the customers and is alive to the demands and delivery service requirements of the market.
Regardless of the type of shipment involved, the basic principle underlying the expectations of the market has always been of exceptional standards in respect of quality and safety of the goods. Hence, several companies have come up with integrated solutions that have become popular with all freight businesses.
Online freight disbursement and contract tracking systems are available that provide authoritative control for the logistics procedure. Using these Internet based services it is even possible to track supply discrepancy reports. This single source information center offers access to the shipment data for carriers as well as transporters. This product also abolishes the requirement of merging of freight bills and invoices and ensures faster and precise payments.
Freight logistics solutions serve as an important tool for better managerial decisions and hence have brought about improved customer services.
In the current scenario, logistics and supply chain matters are more important than ever before and have accomplished greater eminence within business circles. Several freight companies have got into joint ventures with companies that are focused in a sector, to achieve optimization of their services. There are several firms that grant outsourced or "third party" freight logistics services to companies. These providers are specialized in warehousing and shipping services are incorporated into their systems. This can be modeled to the needs of the customers and is alive to the demands and delivery service requirements of the market.
Regardless of the type of shipment involved, the basic principle underlying the expectations of the market has always been of exceptional standards in respect of quality and safety of the goods. Hence, several companies have come up with integrated solutions that have become popular with all freight businesses.
Online freight disbursement and contract tracking systems are available that provide authoritative control for the logistics procedure. Using these Internet based services it is even possible to track supply discrepancy reports. This single source information center offers access to the shipment data for carriers as well as transporters. This product also abolishes the requirement of merging of freight bills and invoices and ensures faster and precise payments.
Freight logistics solutions serve as an important tool for better managerial decisions and hence have brought about improved customer services.
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