The whole world is paying a high price for the unexpected rise in fuel prices and truck owners especially are bearing the brunt of the resulting recession. With higher fuel prices reducing their margins drastically and a lower volume of freight to move around, truckers will require exploring alternate avenues to maintain a workable cash flow that lets them meet their expenses and allows them to plan for the future. One such tool that can help truckers during a recession is factoring.
Unlike traditional businesses, where employers might have fixed monthly expenses, truckers cannot plan some of their expenditures. While drivers might need to be paid on a weekly basis and the rest of the staff on a monthly basis, there might be other expenses lurking in the dark, such as a high fuel bill for a long haul or sudden expenses due to truck repairs, accidents, etc. These unexpected expenses along with a delay in receiving money from credit clients could choke the truckers’ cash flow and even put them out of business. A practical solution to this problem is factoring.
Truckers can sell their credit invoices to a factoring company, who will then arrange to wire the invoices amount to the truckers’ account within 24 to 48 hours. This amount will be minus a small factoring fee of 1.5% to 5% depending on the credit period extended to the client by the trucking company, the customer’s credibility as assessed by the factoring company and the overall business that the trucking company can provide to the factoring company. The factoring facility could also be of the ‘non-recourse’ type, where the factoring company will be ready to bear the loss, if the client does not pay the invoice amount even after the due date or it could be of the ‘recourse’ type, where the trucker will have to pay back the invoice amount to the factoring company, if the client does not pay the money.
The biggest advantage in any of the above factoring types is that the trucking company will receive almost the entire invoice amount within 48 hours of issuing the credit invoice to the client. This will help the truckers to pay the drivers and staff wages, pay for fuel and other repairs and also put into motion any expansion plan that might have been bogged down due to lack of funds.
A positive cash flow will also enable the truckers to go in for larger and longer hauls, which would not have been previously possible. If the truckers enter into a ‘non-recourse’ contract with the factoring company, then they would also be able to divert all energies in increasing the business, instead of chasing after late-paying clients. In other words, factoring will enable the truckers to remain in control of their businesses and also help them to expand it. While it might take some time for the economy to turn around or fuel prices to stabilize, tying up with the right factoring company will help truckers to successfully survive any downturn.
A recession can be an alarming phase for any business and truckers are no exception. The trucking industry is entirely dependent on the health of other sectors. But, with the help of the right factoring company, truckers can safely ride out the storm and confidently face the future