Hurry up and wait. It’s common knowledge that clients always want business owners to hurry up and delivery their services – only to have them wait 30 to 60 days before invoices are paid. Giving 30 to 60 days terms to clients can have substantial implications for small and medium sized businesses, who simply may not be able to afford to wait for payment.

Unless a company has a substantial capital reserve, waiting for payments can be very difficult. There are businesses expenses that must be met – rent, telephone and supplies. There is also payroll, one of the most important businesses expenses that must be met – on time – every time.

If you lack the funds to wait, the obvious solution is to get business financing. This is easier said than done, especially in the current market. Qualifying for a business loan can be a long tedious and uncertain process. One alternative to business loans – at least in some instances – is to get and advance on your invoices using invoice factoring.

Invoice factoring is a simple financing process that provides you with an immediate advance on your invoices. Instead of waiting for your clients to pay, a factoring company advances you funds on each qualifying invoices. The transaction is completed once your client pays the invoice in full. The factoring company charges a fee for this service, which is usually based on a percentage of the invoice gross value.

Factoring has a couple of advantages over conventional business financing. A factoring company is in effect, buying your invoice for a discount (their fee). Because of this structure, they are more interested in the credit quality of your clients than in the financial strength of your company. This makes it easier to qualify for. However, your company must be reasonably well managed and free of any liens or encumbrances. The other advantage is that qualifying for factoring is a quick process – and can usually be completed in a couple of weeks.

Although factoring is not a cure-all, it’s an innovative solution that should be considered if your company cannot afford to wait to get paid on its invoices.

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Financing a business, especially in today’s environment, is very challenging. Trucking companies, by their nature, are cash intensive. You have a continuous outflow of expenses. Fuel. Drivers. Maintenance and all the other expenses that must be constantly handled. Income, on the other hand, is more challenging. It tends to be irregular because more clients pay their invoices in 30 to 60 days.

In summary, you have regular expenses but irregular income. This creates a gap that is opened at expense time and closed once the income arrives. And unless you have enough funds to cover the gap, your trucking company will run into serious problems.

One way to cover the gap is to get clients to pay sooner. This can work sometimes, provided the client is willing to pay quickly. If they are not, your only alternative is to get business financing. This can be very challenging, especially in the current lending environment. Getting a business loan is a long complex process that has a lot of uncertainty. Fortunately, small business loans are not your only option.

If your biggest challenge is that you can’t afford to wait for your clients to pay, you should consider an alternate form of financing called freight factoring. In essence, freight factoring is the equivalent of getting a quick pay. But the quick pay does not come from your client, it comes from the factoring company.

The transaction is fairly simple. You sell your invoice/freight bill to the factoring company, who gives you an initial advance of 90% of the invoice. This advance can be higher in certain circumstances. You get the final advance of 10% (less the factoring fee) once your client actually pays the invoice.

One of the big advantages of freight factoring is that most factoring companies look at the credit quality of your invoices as your most valuable asset. This is very important – because small companies with a solid roster of clients can usually qualify. One further advantage is that a factoring program can be set up quickly – usually in about a week.

In conclusion, freight factoring can be an ideal solution for business owners that cannot afford to wait 30 to 60 days to get paid.

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One of the side effects of the economic crisis is that more companies need business financing while less institutions were willing to provide it. Because of this, companies started looking for other options to business loans. One of the options that has gained substantial traction in the last year is invoice factoring.

Invoice factoring is a form of financing that is often offered by factoring companies. It’s ideally suited for companies that are selling goods/services on net 30 to net 60 days, but can’t afford to wait for payment. This is a common problem since most medium sized companies have immediate expenses and don’t have the necessary capital to wait for payment.

Factoring companies solve this problem by accelerating payment of your invoices. They act as an intermediary who buys your invoices and pays you for them immediately. This provides your company with the necessary cash flow to pay operating expenses and handle new orders. The factoring company, which now holds the invoice, waits for your client to pay for the invoice and settle the transaction.

A factoring company usually buys your invoice in two payments. The first payment, called the advance, is usually 80% of the invoice. The remaining 20% is called the reserve and is held to cover any invoice discrepancies and potential underpayments. Once your client pays the invoice in full, the factoring company sends the second payment, which is the 20% reserve less the factoring fee.

Factoring fees are determined by the credit quality of your clients, the volume of financing that you need, your industry and invoice diversification. They vary in range but they are usually a specific percentage of the purchased invoices.

One of the big advantages of invoice factoring is that factoring companies consider the credit quality of your invoices to be your biggest asset. This means that medium sized companies that have a solid roster of clients can usually qualify. However, to qualify for factoring your invoices need to be free of any potential encumbrances or liens.

Business owners are usually surprised that a business that has solid income can actually have serious cash flow problems. Sounds like a contradiction, but consider that income is usually booked when you invoice the client – not when they pay. And in the commercial world, clients pay on “terms” and can take 30 to 60 days to pay for their invoices. This cash flow gap can surprise many business owners and create serious problems to the company.

One way to handle the gap is to try to convince clients to pay their invoices sooner. Sometimes this works. Oftentimes, it doesn’t. Clients like to pay invoices in 30 to 60 days because it helps their own cash flow. You can be sure they will be reluctant to change their payment habits.

Another alternative is to apply for business financing. The current lending environment is difficult though, and getting a business loan will require substantial work and take time. Since most institutions are being very careful with their business loans, you can expect them to be very diligent and require a lot of documentation, such as financial and tax reports. And even if you have reasonable financial statements, there is a chance your request will be denied for other reasons.

There is a third alternative is to use a financial intermediary to get a quick payment on for your invoices. Invoice financing, as the process is called, is relatively straight forward. A financing company advances a payment against your net 30 to 60 invoices. They hold the invoice until it pays, while you get immediate use of the money. The company charges a fee, usually a percentage of the invoice, for this service.

One advantage of this form of financing is that the financing company provides you with financing based on the strength of your invoices. This enables small companies with a good list of clients to get this form of financing. Another advantage of invoice financing is that it’s easier and faster to qualify for than a small business loan.

Invoice financing can be a great solution for companies that have good clients but can’t wait 30 to 60 days to get paid for the products and services.

The number of companies looking for business financing has increased as a result of the current economic environment. Unfortunately, the number of institutions that are willing to provide business loans has decreased substantially. This has created a surplus of companies who need but can’t access to funding in their time of greatest need.

One of the biggest reasons companies need funding is because they have cash flow problems. These can stem from lowered sales and slow paying clients. As a matter of fact, slow paying clients represent a major challenge for business owners. Accustomed to paying invoices in 30 to 60 days, it’s hard to ask clients to pay invoices faster. Especially when they can take their business to competitors elsewhere at any time.

If your biggest challenge is that you can’t afford to wait for your clients to pay, and your business is otherwise doing well, invoice financing may be the right solution for you. When used correctly, invoice financing can provide the needed funding to help your business.

To use invoice financing you need to work with a funding company that acts as an financial intermediary between your client and your business. Once you invoice your client, you sell the invoice to the funding company, who pays for it immediately. This gives you the funds you need to pay expenses and grow the business. The invoice financing company, who now holds the invoice, settles the transaction once your client pays in full.

One major advantage of invoice financing is that the funding company main interest is in buying quality invoices. That means that clients with few assets other than invoices from solid clients can usually qualify for this type of funding. Also, the funding is tied to your sales, and therefore is dynamic. It will grow with your sales volume.

Invoice financing is a solution that works well for companies whose main problem is that they can’t afford to wait up to 60 days to get paid by clients.