Freight Broker Factoring
Freight brokerage factoring is a sub-specialty of transportation factoring. Few factoring companies maintain the people and skill in freight brokering to service the unique needs of the trucking freight brokerage industry.
Factoring assists the freight broker by ensuring that the money generated from a load is placed in a lock-box or paid to the carrier that moved the load. Some brokers create a situation when they receive a payment for a movement and use those funds for something other than paying the corresponding carrier.
The financial danger erupts when funds from the next load are needed to pay the carier from the prior. .
Such a scenario can tempt brokers to use the funds from the next load to pay for the last load creating an endless cycle that has been the cause of failure for many brokers. Factoring can ensure that you avoid this unnecessary predicament.
The freight broker is in a particularly precarious position as they frequently have several deals in motion at a time. A trucking company on the other handtypically has it's exposure limited by the number of trucks it is operating while a broker may have several open agreements that create cash flow demands that often exceed their capacity if they are not careful.
Factoring allows the broker to receive an advance on the shipment which gives the broker the cash flow that they need without tempting them to pull from the cash that they should be paying to the trucking company that actually moved the shipment.
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