Utilizing freight broker factoring can help you leverage your small business in various ways. Not only will it expand your business, but these brokers can provide your business with immediate resources.
Plus, a freight broker can connect you with a vast network of carriers for you to find the best deal possible! Here’s how to go about finding the right freight broker factoring option for your small business.
What Does Freight Broker Factoring Look Like for Small Businesses?
Businesses of various sizes have different goals when it comes to freight broker factoring. For smaller businesses, either within the carrier or broker industry, you may be specifically looking to increase and speed up your cashflow.
Freight broker factoring can assist in this procedure, though freight broker factoring may be the same process for small and large businesses. Still, it is important to prioritize the factoring characteristics that you think will be the best fit for your business.
In some cases, you can get a lot more included in a factoring service like digital invoicing, workflow automation, credit protection, and a better accounts payable flow too.
Are There Requirements for Factoring with Small Brokers or Carriers?
There typically aren’t drastic changes in application requirements based on the size of your business. Most factoring companies require financial documentation that shows you, or your business, have decent credit and no history of major financial trouble.
There are a few options however that do not look at your credit and instead look at your customer’s credit instead and require a similar but different set of documents or information just to ensure your business is legitimate and has no history of wrong doing.
Can You Establish Credit With Factoring?
Even if one does not have credit, there are factoring companies out there that help establish this credit.
This will be dependent on the factoring company, however, since some are more stringent than others on these requirements. That is why it is crucial to specifically seek out companies that have a plan that caters to smaller carriers or brokers.
What Is an Automated Process in Factoring?
Specifically for smaller brokers, one might be stuck with time-consuming back office tasks, such as data entry and risk assessment, when it comes to processing an invoice. However, this can be eliminated by automating your back office with the right factoring partner.
Brokers can also retain and support better carriers with faster payment options like quick pay. A few advanced factors can help do this digitally. With an automation tool, the tedious process of going through data entry is done within minutes while eliminating the possibility of human error.
Moreover, it can help small businesses save on operational costs as the operation grows.
Things To Consider With Freight Broker Factoring For Small Businesses
Some of your concerns for a small or new business, may not be the same as those that are already more established. When looking for a freight broker factoring company, it is important to seek out benefits that align with your specific needs. Here are some of our top considerations for small broker or carrier businesses.
Credit Requirements
As stated above, it may be harder for smaller or newer businesses to prove they have a good credit history. However some factoring companies take this into consideration when looking through applications.
Seek out factoring companies that have programs that can accept businesses from the very beginning to about two years of age. You’ll also want a company that doesn’t require permission to perform a credit check or bases the program on your financials.
There will always be a background check whether credit checks are required or not. However “know your customer” processes that stand in the place of credit requirements typically mean that you can start factoring without meeting specific credit requirements.
Payment Management
With smaller businesses, time is of the essence. When choosing a factoring company look for those that provide automated processes. This will allow you to reduce the time you spend on invoicing and data entry as a whole. Moreover, it will allow you to get access to these funds quicker, making your carriers and thus your clients satisfied as a result of the quick turnaround times and clear communication.
Eliminating Risks
When it comes to invoicing and managing funds, payment risk is always a possibility. That’s why it’s important to specifically look for factoring companies that emphasize the fact that their service will actively work to minimize the possibility of risks at all costs.
When looking for the right factoring company for you, be sure to ask about what they do to prevent non-payment risks. That way, based on their answers, you’ll be able to see if the factoring company is best aligned with your small business needs.
Target Customers
When looking at factoring companies, it may seem like they all provide similar services. However, it is important to know who your factoring company target customers are.
Those that are specifically looking for small carriers and brokers will be a better fit since they will be able to cater to your needs. Moreover, this type of factoring company may have a different way of proceeding with business, like smaller brokers having to invite carriers into their networks in order to get paid.
Advantages of Freight Broker Factoring
There are various benefits that come with using a factoring company especially for smaller businesses. Whether you are just starting out as a broker or a carrier, these advantages may look different to you than those of large companies.
Here are some of the top advantages of using a factoring company as a small business:
- Can help scale out small trucking business’ accounting
- Quick turnaround time for payments
- Reduce time with automated processes
- Free credit checking of your customers
- Can help you establish credit
Choose a Factoring Company Today!
Choosing a factoring company may seem overwhelming. However, there are companies out there that are specifically designed to cater to the needs of businesses like yours.
Prior to sending an application to a factoring company, look out for businesses that strive to provide automated processes, do not require credit checks, and offer a quick turnaround time for payments. Whether you are a small broker or a larger carrier, there are factoring companies that can assist you in your business endeavors while helping to expand your opportunities.
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