Accounts Receivable Financing, otherwise known as invoice factoring, is a sustainable way of self-financing your trucking business, whether you are looking for a permanent solution, or a way of complementing your other long-term options, the factoring industry is seeing an increase in popularity for transportation businesses in both the US and Canada. With annual sales in the billions of dollars the factoring industry is positioning itself in its rightful place. It is the nature of the factoring model itself that is attracting trucking business owners who are looking to free up cash flow for their business operations.
From small one truck companies to large fleets, invoice factoring for trucking offers immediate cash flow and reliable administration services to trucking business owners. Sales could easily be sustained by a reliable financing model and growth can be achieved at a much faster rate since you control your cash flow.
There are a number of reasons or circumstances where a trucking business owner will choose factoring as an alternative to traditional financing. A business may not qualify for traditional financing due to such things as – an over-leveraged balance sheet or recent operating losses; a start-up company with no financial base; a high growth business that’s growing faster than its cash flow; or a business in transition.
Using invoice factoring simply requires the selling of the outstanding invoices to the accounts receivables factoring company, and, in turn, you are given an advance on the receivables balance. Access to working capital is immediately increased without waiting 30-60 or 90 days. Qualification is quick and simple and first funding begins in a few short days. To secure its position as the primary lender, factoring companies will typically require a first position filing on the assets of the company, or in some cases it may establish an inter- creditor agreement and a carve-out of only certain collateral within the accounts receivable portfolio.
Having strong and flexible cash flow is one of the most important aspects of growing and maintaining a strong business. Businesses in both the US and Canada often turn to factoring companies to help them free up and manage their cash flow.
Expanding your Operations as you meet new opportunities
Invoice factoring is a powerful financial strategy readily available to growing trucking companies. Whether you are a one truck company, a medium size fleet, or a larger more established fleet expanding to meet demands, common challenges are faced. To enable growth, you need: more equipment; more drivers; more working capital or more back-office support.
Without adequate financial backing, many trucking businesses face growth as a challenge. Increased qualification restrictions and stringent covenants prevent many trucking companies from attaining necessary funding from the banking system. To grow; you need a lender who understands your business and has the financial tools to meet your needs. Factoring companies specializing in the trucking industry offer several financial solutions tailored to trucking business.
Fuel costs are typically the largest operating expense that must be paid daily to keep trucks moving. This is a heavy burden on a trucking company with slow paying customers and limited cash flow. To combat this constant pressure, invoice factoring companies that special in the trucking industry offer fleet fuel credit cards. Providing significant discounts on the cost of fuel and delayed payment with easy to manage credit terms, fleet fuel cards level the play field allowing small and medium fleet owners to compete with the larger carriers.
The benefits of invoice factoring reaches well beyond the ability to quickly convert invoices to cash. When you factor with a reputable and knowledgeable firm, your company also benefits from professional Accounts Receivable Management, unlimited access to credit reports and a dedicated Accounts Manager to help you understand the information. This will help you reduce bad debt and keep your cash flow healthy.
Finding the right alternative financial provider to factor your invoices is highly critical. Look for a reputable firm that discloses the needed details upfront to make an informed decision. Reviewing your Accounts Receivable Aging Schedule with the factoring company prior to committing to their services is vital to making the right decision. You may have $100,00.00 in receivables from various customers, but if your factoring company does not consider all your customers as credit worthy, you may discover that .
Not all your invoices will receive funding. In other words, you may only receive $40,000.00 or $50,000.00 in advances, the remaining receivables are considered un-fundable. Too many trucking companies have signed up with a factoring provider only to find out that a portion of their receivables cannot be funded. A reputable factoring company, will assess all your financials, including the Accounts Receivable Aging Schedule to ensure you have a clear understanding of how much cash you can expect to have advanced to you from your customer base. Furthermore, the right factoring company will also provide you with tools, resources and practical advice on the best ways to forecast, track and manage your cash flow.
Want to learn more about how freight factoring can help your business? Contact one of our factoring specialists.