Freight Bill Factoring
How to Finance a New or Growing Trucking Company
Trucking companies tend to be cash intensive businesses. To grow the company beyond the proverbial one person one truck business you will need access to capital or business financing. The big challenge is finding – and obtaining - business financing in this environment. Even though the recession ended a long while back, we remain in a small business credit crunch. Most financial institutions are unwilling – or unable due to their financial problems – to provide business loans to small transportation companies.
The biggest problem for most trucking companies and brokerages is cash flow. This problem stems from the fact that most trucking companies and brokerages have immediate expenses but delayed revenues. In other words, they need to pay for drivers, repairs and fuel quickly. On the other hand, customers pay their invoices 30 to 60 days after service. This time gap between expenses and income forces trucking companies to dip into reserves to cover current expenses. And therein lies the problem since few companies have the required capital reserves to cover current expenses for up to 60 days, while growing the company at the same time.
The obvious solution to the problem is to reduce the time it takes for customers to pay you. This is easier said than done since customers like being able to pay in up to 60 days. It helps them with their own cash flow. One strategy is to offer the customer an incentive to pay quickly, such as a discount if they pay within 10 days. It’s a good strategy, if your customers are willing to work with you. You will still be at the mercy of customers who may change their mind and opt out of the discount (and early payment). For many, the better solution is to use business financing.
There is one business financing solution that solves this cash flow problem and has remained available during the credit crunch. It’s called freight bill factoring. Freight bill factoring allows you to have the equivalent of a quick pay on your freight bills, without having to worry about convincing your customers to pay quickly. So instead of waiting 60 days to get paid, you can get paid in a few days. This strengthens your cash flow and helps ensure you have the funds to meet current expenses and take on new loads.
Freight factoring works by using a financial intermediary called a factoring company. The factoring company advances funds based on your freight bills and holds the invoices until your customer pays in full. Once your customers pay, the transaction is settled. The factoring company’s main collateral is the creditworthiness of the invoices it finances. This makes it a good solution for small carriers and brokerages whose biggest (or only) asset is a strong list of customers can benefit from this solution.
Factoring is an ideal solution for carriers and brokerages whose biggest challenge is not being able to wait 60 days for clients to pay their invoices.
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How to finance a Startup Freight Brokerage with Factoring
One industry that is improving, along with the economy, is transportation. Many existing transportation carriers and freight brokers are seeing their revenues increase as the industry picks up. The improved economic outlook and the condition of the industry have also prompted individuals with industry experience to start new freight brokerages.
Although running a freight brokerage can be very profitable, the business is very cash flow intensive. You need to keep your drivers happy, which means they need to be paid quickly. In the meantime, your large corporate customers will demand that you give them net 30 payment terms. In other words, your drivers want you to pay them quickly and your shippers want to pay you slowly. As a freight broker, you are expected to manage that payment discrepancy and keep all parties happy.
Few start-up or growing brokers can afford to wait 30 days to get paid by their clients. Simply, they don’t have the funds to cover the operating expenses of the business. This is a big limitation for them and prevents them from growing the business and capitalizing on opportunities. To complicate matters, getting business financing for a freight brokerage is very difficult. Few banks will provide business loans to the industry in part because they don’t have hard assets (i.e. real estate) to use as collateral. Either way, a business loan is no necessarily the best solution either.
A better alternative for many freight brokers that have cash flow problems is to use freight factoring, also know as road factoring or truck factoring. This solution is designed specifically to help companies that have clients that pay in 30 days but need the funds sooner. Freight bill factoring provides a cash advance on the net 30 invoices, providing the necessary funding to pay drivers and other business expenses in a timely fashion.
One of the most attractive features of freight factoring is that most freight brokers can qualify for it – even start ups. This is because factoring companies consider your freight bills from strong shippers to be your best collateral, and they are usually happy to advance funds against them. This means that brokers with few assets except a strong roster of shipping clients can usually qualify. Aside from having strong shippers, most factoring companies will only work with freight brokerages that have no lawsuits, judgments or liens.
Freight bill factoring is an ideal solution for freight brokers and transportation carriers who can’t afford to wait 30 days or more to get paid by their clients.
Freight Bill Factoring – Easy Trucking Company Financing
Running a transportation company such as a carrier or brokerage can be very challenging. Owners are constantly bombarded with concerns: drivers to pay, repairs to make, fuel to buy, and loads to deliver. To top those concerns, there are slow paying customers that might take more then 30 days to pay their freight bills. Solve cash flow issues with freight bill factoring.
Managing slow paying customers can be a real hassle. For example, if you call them to ask for a quick pay, you run the risk of upsetting them. And upsetting a customer can be very dangerous. On the other hand, waiting for payments can be a real problem, especially if you need to pay drivers or suppliers. Drivers don’t like to wait to get paid.
The solution is to get business financing with freight bill factoring. Many times that is easier said than done since in today’s business environment getting a business loan is close to impossible. However, there are financial options that work better than business loans – especially for growing carriers and freight brokers. One alternative is to factor freight bills.
Freight bill factoring solves an age old problem in the transportation industry – slow paying clients – and provides financing to pay drivers, fuel and other operational expenses. It provides a platform for financial stability, enabling the carrier or broker to focus in growing their businesses.
Factoring provides a simple solution to the problem. The factoring company gives you and advance on your freight bills, and then waits to get paid by your client. In the meantime, you get the quick payments you need. You get the funding to meet business expenses and to grow your company. The initial advance is usually about 90% of your freight bill. You get the remaining 10% (less the financing fee) once your client pays the freight bill in full.
One major advantage of invoice factoring is that it’s easy to obtain. Factoring companies can extend financing if you work with credit worthy clients or freight brokers. Furthermore, they will also work with new companies and start-ups. Generally, setting up a factoring relationship is very quick. Most factoring clients can obtain financing in 5 to 7 business days.
Although freight bill factoring is not for everyone, it can help carriers and brokers whose biggest problem is dealing with slow paying clients.
Factoring – Trucking Industry Cash Flow Solution?
One of the most needed industries in the USA economy is the trucking and transportation industries. Just about every product that contributes to the economy is transported on a truck at some point in it’s journey to the point of sale. Many small trucking companies have been struggling with the cost of fuel increasing and margins getting very tight. Freight Brokers and direct shipping companies have demanded longer payment terms putting a cash flow crunch on the haulers. Freight bill factoring has provided a solution by converting the freight bills to cash as soon as the product can be confirmed delivered in good standing.
When a trucking company has cash flow issues and can reduce the time waiting for cash from 40 days to 1 day drivers can get paid quicker and trucks can be fueled up without waiting for funds to be paid by the freight brokers and direct customers. This quicker turning cash can also allow for growth and adding additional drivers and trucks. The cost of freight factoring can range from 5% for one truck operations to as low as 1% for transportation companies with more than 50 units. Some factoring companies specialize in trucking and offer services such as 24 hour customer credit checking so you can check the credit quality of a load and any time of day. This can be a great tool for a small trucking company with limited resources.
Another nice feature is having the ability to submit your freight bills and invoices from the road. If your a small operation you cannot afford to be overnighting shipping documents on every load you deliver so you can get the bills factored. Several of the more advanced freight factoring companies now offer funding via fax, scanned emailed documents, or electronic programs. Depending on the needs of your trucking company you may or may not need to use truck factoring long term. That is why it’s very important to only sign a factoring agreement that fits your projected needs, especially with the term length. The contract terms can range from 1 month to 12 months depending on what factoring companies your evaluating.
If you have customers with reasonable credit you should not have any issues getting approved for freight bill factoring. It makes good sense to go with the highest advance rate you can find along with the lowest rate structure. Often a tiered rate over time will work out better than a flat rate so do not go with a flat rate until giving it a good look with your business model. The bottom line is cash flow help is available for just about any trucking company that could use immediate cash rather then waiting 30 or more days for payment by using a financial tool called factoring.
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Freight Factoring Companies Support Hard Cash Flow
Freight Factoring Companies help keep adequate cash flow in your growing business.
Sustaining correct hard cash flow is usually crucial to business operations, but in the course of the first 12 months of your new trucking company it is specifically hard to attain as you have no “track record”. You currently pay out for your truck, insurance, energy, and overhead expenses. Right after delivering that 1st load, you can expect to wait 30 to 45 days or longer to get paid on your freight invoice.
One particularly sluggish or uncollected invoice could make it difficult to obtain fuel to haul that following load. With out sufficient cash, you could be out of business just before you genuinely get began. This is exactly where the assistance of freight factoring companies could be extremely helpful.
Use Freight Factoring Companies & Don’t Get Stuck at The Pump
With the aid of freight factoring companies you won’t get stuck at the pump or have to anger drivers by not paying them on time. Small size trucking companies often underestimate the impact of a slow paying invoice, but that additional thousand dollars could make the difference among acquiring that next load or investing the weekend on the telephone trying to figure out how to pay for fuel to get home. Your enterprise may have paper income with huge account receivables balances, but with no cash, the enterprise could fold just before these bills are collected.
Permit Freight Factoring Companies be your slow paying freight bill invoice answer
Freight factoring companies can solve the issue of a gradual having to pay invoice by making use of a answer that gives the equivalent of a quick payment. It’s referred to as freight bill factoring. It operates by making use of a financial intermediary (Freight factoring companies), who developments funds against your freight bills. They settle the transaction as soon as your customer really pays the bill. 1 benefit of factoring is that it gives the equivalent of a speedy payment, with no requiring your customers to spend more quickly. This makes it effortless to integrate in most organizations.
Freight factoring is less difficult to get than other forms of financing. To qualify for this kind of financing, your enterprise should have solid commercial purchasers, be free of lawsuits and encumbrances and have great growth and stability.
There are many freight factoring companies to choose from, but Pay4Freight.com’s focus is to work directly with modest trucking companies and sole proprietor operators, so they can compete equally in the transportation marketplace. Their specialists take pride in offering you the greatest non-recourse freight factoring providers in the market. Call Pay4freight.com right now and leave your slow paying invoice troubles behind!
RECOURSE FREIGHT FACTORING IS NOT YOUR FRIEND
RECOURSE FREIGHT FACTORING IS NOT YOUR FRIEND
Recourse vs. Non-Recourse Freight Factoring for Small Company Fleets
Difficult Economy & Increasing Costs Increase Require for Freight Factoring
In today’s difficult economic problems the modest trucker is challenged by lower freight rates due to the existing over capacity of truckers versus freight availability. Presently, the small trucker has to go farther outside their residence area to choose any worthwhile freight to carry on to function and offer for their loved ones. This summer time, new government safety regulations go into effect that encompasses each the provider operation and person drivers. The total trucking business will once again deal with fuel price volatility, which for the tiny provider causes havoc in attempting to determine if a load is really worth taking or not. And, of course, usual maintenance and repairs on your gear is vital to run safely on the road and continuing to make a located.
All of these items need hard cash, and plenty of it, to get you from load to load so that you can make a located or operate your enterprise. Most small, medium, and even several significant provider fleets must use freight bill factoring to keep the money flowing to meet the essential expenditures in running a trucking organization, regardless of size.
Non-Recourse or Recourse Freight Factoring, Which is Right for You?
In today’s present trucking factoring surroundings, you have two alternatives when factoring your freight bills: recourse or non-recourse. Recourse factoring, the most obtainable type of factoring, is the carrier’s out correct sale and assignment to the aspect of their proper to payment for a freight invoice. Much more frequently, recourse freight factoring is acknowledged as invoice at a low cost;.
Recourse Freight Factoring
You should realize, nevertheless, need to the freight invoice amount not be paid to the trucking freight element for any reason by some predetermined date, you ought to reimburse the aspect 100% of the advance you obtained, PLUS their costs. The lower price rate charged by a recourse freight aspect is generally never fixed; it is usually variable, and increases dependent on the factor’s advance day to the provider and ending with the eventual collection date of the invoice.
Non-Recourse Freight Factoring
Non-recourse factoring is the carrier’s sale and assignment to the trucking factor of their rights to payment, or invoice, to the element. Should the company whose invoice you acquired payment for fail to pay the invoice, the element absorbs the total loss and you, the company, have no additional obligation to the aspect.
All non-recourse elements cost a flat lower price charge. They will normally advance 100% of the amount due the provider, much less the low cost payment. This kind of factoring is plain and simple, with the company gaining the maximum sum of cash upon the sale of the invoice to the element. It also fixed the lower price charge, nonetheless, the factor could cost other ancillary charges as nicely.
Efficiency Risk is Yours
No trucking factor requires on efficiency danger of any type; individuals incidences are generally recourse back to the provider. Examples of company overall performance danger are: failure to abide by any broker or shipper/company contract provision. These agreement provisions especially extend to the rate confirmation and the requirements for delivery. Any injury, shortage, and expected condition of the freight upon delivery to the consignee. Nevertheless, the most essential detail, and frequently the most missed, is the Bill of Lading evidencing the carrier as the rightful delivering party. To the aspect, has the carrier appropriately documented their completion of the support so an enforceable obligation in between the factor and the broker or shipper legally does exist? If the provider fails to satisfy this requirement, the non-recourse factor’s credit guarantee becomes invalid.
Call Pay4freight.com today to discover how our Freight Factoring providers can assist your organization!
Solve Your Cash Flow Issues with Freight Bill Factoring
If you are in the trucking industry then you must be aware of how difficult it is to manage various expenses without enough cash in your hands. The payments that you are supposed to receive from your clients, government or non-government, usually come after a period of 30 to 90 days. In the meantime, you have to pay salaries to your drivers and other employees, pay rentals, repairs and maintenance of trucks. You might also have good proposals of bulk purchases with discounts but not enough cash to pay for them. In this scenario, a freight bill factoring company can come to your rescue.
The freight bill factoring company purchases your bills and pays you cash in return. The first installment that comes is usually 60% to 90% of your bills. This is done electronically and should not take more than 24 working hours to be transferred to your account after you have struck the deal and provided the factoring company with necessary details. Thus, you get a bulk payment for your invoices that help you meet all other expenses related to your business. The 2nd installment comes when your client has made the payment to the factoring company. This payment usually comes minus the fee of the factoring company.
This way, the money that would have otherwise been blocked during the cash period, flows into your business, making it easy for you to make payments. You can also make bulk purchases at discounted rates if you are able to provide cash money to the suppliers. This in turn, increases your sales and you are able to earn more by getting better and bigger offers from your clients. Therefore, the cash that comes from the factoring company helps you in the overall development of your business.
With ready cash in your hands you are also relieved of the tension you would otherwise have had, due to non-payment of bills. Additionally, you can also divert your employees in the collection division to some other productive work. Worries of collection and bad debts are transferred to the factoring company, to leave you to concentrate on other important aspects of your company like marketing, purchases and sales.
An advantage of obtaining cash from factoring companies rather than loans from banks is that you are saved from the ordeal of producing collateral, showing your accounts and credit history and looking for guarantors. All you need to do in a factoring firm is to sign a deal and provide them with the bills and the very next day you have cash-in-hand to meet your business requirements. You are also saved from the high interest that a bank would charge and the EMI’s that you would have to pay if you had borrowed a loan from a bank.
A very important aspect to be kept in mind is that you should keep your gross profit margin over 15% so that you are fully able to enjoy the benefit of factoring services. In factoring services, getting quick money is not the only criteria. You also have to keep in mind the fee you pay for such services, based on which your profits should be calculated. You should be able to capitalize on the sales that increase due to ready cash from factoring services to help your cash flow by factoring your freight bills.
Freight Bill Factoring for Canadian Transportation Companies
One of the biggest challenges of owning a logistics company is managing all the payments associated with operations. This is true for both freight brokers and truckers. There are driver expenses, fuel expenses, office expenses and repair expenses. What makes managing these expenses difficult is that few clients offer a quick pay alternative. More often than not, they will require that you give them 30 to 60 day payment terms. That is where the problem lies, especially for growing companies.
Basically, you have expenses that must be paid now and income that will come later. There are only two ways to cover this gap. If you have some capital, you can cover the expenses and wait until you get paid. Otherwise, you will need to get business financing.
Most owners think that business loans are the only form of financing for a business. The challenge with a business loan is that they are difficult to obtain. Most banks in Canada are conservative and will only provide a small business loan if the company has a solid track record and substantial assets.
Furthermore, a business loan is usually better if you use it buy capital goods/equipment, rather than to solve short term cash flow problems. One alternative form of business financing that has been gaining traction in Canada is freight factoring.
Freight bill factoring is a financing product that is designed specifically to solve the time gap between delivery of services and payment. It provides a cash advance against the freight bill, providing funds to meet business expenses and tackle new opportunities. One important difference between business loans and factoring is that freight factoring is usually easy to obtain. The most important requirement is that you work with clients who have good commercial credit and pay their invoices – albeit slowly.
Transactions can be structured in a couple of ways. Most companies opt to get two advances. The first one, about 90% of the invoice, is given immediately. The remaining 10%, less a fee, are advanced once the actual invoice is paid by the client. Others opt for a full advance, where they get only a single full advance (usually higher than 90%). However, these transactions have a higher cost.
The costs of financing are determined by the volume of invoices you finance and the credit quality of your clients.
How to Fix Your Transportation Company’s Cash Flow
Do you feel that your trucking company is heading straight for a cliff? Do you feel that your trucking company is stuck in neutral? Or worse, do you have lots of slow paying freight bills and not a lot of cash in your business bank account?
Having slow paying clients is one of the worst problems that you can have. Especially when you own a cash hungry trucking company that needs money to pay for drivers, repairs, fuel and equipment. The biggest cash flow issue comes from your slow paying customers that can take up to 60 days to pay your freight bills.
If you are like most owners, your first reaction is to try and get a loan. However, a loan will only cure the temporary problem. What will happen in four months when the loan money has run out? You will be left exactly where you are standing now. Back to square one.
A better solution would be to eliminate the slow payments all together. Note that I did not say that we should eliminate the slow paying clients…..just the payments. What do you think you could do if all your freight bills were paid in two days instead of 30 or 60?
There is a solution that can help you accomplish that. Is called freight bill factoring and is one of the best financing tools for transportation companies. It eliminates the guesswork of having slow paying clients. Freight factoring provides you with immediate funding from the moment that you generate invoices from approved clients.
Factoring provides you with the necessary funding to meet your expenses. But more importantly, it provides you with the necessary funding to capture new opportunities and new contracts so that you can haul more loads and grow your company. With factoring, you no longer need to turn away opportunities just because they may be slow payers.
Qualifying for factoring is usually easy. The main requirement is to have freight bills from good credit worthy clients. Things such as financial statements or personal credit reports are seldom required, making the application process fast, easy and very user friendly.
Freight Bill Factoring is a cost effective solution that can help you drive your freight company to the next level.
Using Freight Bill Factoring to Fund your Transportation Company
Most transportation company owners have to constantly juggle responsibilities. They have to handle vehicle repairs, driver payments, insurance payments, office expenses and more importantly – collecting invoices. Collections can be source of problems for many transportation companies (or freight brokerages) since most clients pay their invoices in 30 to 60 days . Few can afford to wait that long.
One way to handle slow payment is to try and negotiate a quick pay – basically asking your clients to pay quickly. Some will do it. Others won’t, or at least will only offer it if you give them a discount. Although they are not always reliable, negotiating a quick pay can be beneficial in most cases.
If quick pays won’t work, your best alternative is to secure business financing to ensure you always have funds on hand to cover business expenses. This can be difficult for most owners since institutions require that all applications have stellar credit, assets that can be held as collateral and many years of experience. This will rule out business loans as an alternative for most small and midsized trucking companies. However, this is not necessarily a big problem since a business loan is not always the solution to this problem.
For many, freight bill factoring will be the better alternative. Freight factoring, as it is commonly known, can provide the equivalent of a quick pay by using an intermediary. The intermediary, called a factoring company, advances you funds against your freight bill. The transaction is settled once your client pays the invoice in full.
One of the advantages of freight bill factoring is that it provides predictable cash flow, enabling you to comfortably handle your business expenses. It eliminates having to worry about when your clients will pay.
To qualify for freight factoring you need to work with credit worthy clients. Also, your company needs to be free of liens, judgments and other encumbrances. Because of this, freight bill factoring is an ideal solution for small and growing trucking companies and freight brokers.