As good as the factoring concept is, with a lot of advantages, it still has its cons. Every business, regardless of its size or origin, needs to weigh the benefits and drawbacks of a product or service before utilizing it for their business operations. We’ve looked into and made a list of the pros and cons of using factoring companies.
Pros of Freight Factoring
- Swift disbursement of funds.
- Unlike banks, your credit score or history is not much of a factor.
- Avoiding debts.
- Financial flexibility.
- You don’t have to worry about payments from the customers.
- Free credit checks on potential customers.
- The value of your business isn’t lost or damaged.
- Steady cash flow
- It’s easy to get approved, and the process is quick.
Cons of Freight Factoring
- Bills must be paid in full by or before the due date on the invoice.
- To be approved, you must have good-paying customers.
- Rates can sometimes be too expensive and higher than the normal bank loan rate.
- Customers are notified when you change your payment address.
- You may be held accountable if your customer doesn’t pay.
With so many disadvantages to freight factoring, its pros still outweigh its cons.
Always double check the form you are given to fill out before signing up for the services of a freight factoring company. Make sure to ask for clarification on any part of the agreement you do not understand, such as the factoring rates on a freight invoice.