Many freight forwarders come across cash flow problems at some point. Normally, this results because they have to pay shippers, warehouses and other service providers in the supply chain before their customers pay them. This can create big problems for startups, growing businesses, or any business without cash reserves.
Obviously, if you can't pay your carriers,(warehouse rent and suppliers) you're not staying in business for long. Some freight forwarders try to solve this problem by paying more slowly than they get paid, but this creates more problems then it solves. Eventually, two of your most important assets, your credit standing and your business reputation, diminish if you do business this way.
Let me offer you a better solution. It's called invoice factoring and it is tailor made for businesses, such as freight forwarders. Here's how it helps you speed up your cash flow and solve your cash flow problem. It starts with your accounts receivable invoices. The factoring company reviews your invoices and the credit worthiness of your customers. They consider your credit history secondarily, if at all. Then, based on your invoices, they make a decision to fund your need. Most factors give you 80% to 90% of the face value of your invoices upfront within 24 to 48 hours. Then they take on the responsibility of collecting on your invoices. You don't have to lift a finger, you just keep focusing on what you do best, managing the supply chain. After the factor receives full payment on the invoices, you get the remaining value of the invoices, less the factoring fee. Normally, this fee runs about 1% to 3%, and depends on the quality and value of your invoices.
A Summary of the Benefits
Now you've probably already realized the benefits in this arrangement, but here's a quick summary:
I hope you see how invoice factoring is a great fit for freight forwarders. Keep in mind, you do not have to factor all your invoices, but I recommend you at least try it with a portion of your invoices and discover the benefits. If you have any questions, need more details, or exact terms contact us or sign up today!
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