Factoring Financing Articles

Although the economy is recovering, the strength and duration of the recovery remain uncertain. Because of this, many companies are reluctant to hire permanent employees, opting instead to use a temporary staffing agency to fulfill their personnel needs.

The staffing industry has seen a considerable increase in their level of activity as companies start ramping up their production. Although this is very good for the industry, it also creates a cash flow problem. The employees that are hired by the agency need to be paid weekly (or every two weeks), but clients pay their invoices in 30 to 60 days. Therefore, staffing agencies need a financial cushion to handle these expenses until their clients pay. The demands on this financial cushion will increase if the agency lands a new contracts.

One easy way to fix this problem is to put more capital into the business – either directly or through investors. This can be complicated, and could involve giving up some equity in your company. Another alternative is to get business financing – either through a business loan or a line of credit. Both of these products can be hard to get as the company will need to show solid assets, an experienced management team and a well crafted business plan. The problem is that staffing agencies don’t have assets in the traditional sense of the word – there is little if any real estate, and no machinery or equipment. The assets are their employees, and those walk out the door every day. There is an alternative to conventional business loans that can work well in this situation – it’s called invoice factoring.

Invoice factoring provides an advance payment for the staffing agency’s accounts receivable. This reduces the time you wait to get paid from 45 days to just a few days. This reduces your reliance on a cash cushion and provides liquidity to meet your company’s expenses.

Also, invoice factoring is easier to get than conventional financing. Most factoring companies consider your invoices to be strong assets. Because of this, a factoring company will usually be willing to extend financing to small businesses that have potential and solid customers. This makes invoice factoring a very accessible form of financing.

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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Fuel. Repairs. Salaries. These three items are ever present in the minds of trucking company owners. These are the three most important expenses of any trucking company and they need to be paid regularly and on time.

Making these payments on time can strain the cash flow of even the most established trucking companies. This is because like most businesses, trucking companies have to give their clients net 30 terms to pay their invoices. However, many of the costs are immediate. This creates a gap where expenses are immediate, but revenues are delayed. And, if this gap is not managed properly, the company risks going out of business.

Unless your company has adequate reserves, your only options to manage the gap are to either restrict growth (thus control expenses) or use business financing. Although many owners resort to conventional small business loans, freight bill factoring is usually a better solution for this particular problem. That’s because freight factoring provides a quick pay for freight bills, reducing the gap and making it more manageable.

Freight factoring has a number of advantages over a business loan for this specific type of problem. An important advantage is that it’s easier to qualify for factoring than it is for a business loan. That’s because factoring companies look at the credit quality of your payers when making their decisions. Furthermore, freight factoring is dynamic. Your financing line can be designed to grow in size with freight bill volume, providing a form of financing that firmly supports growth.

Most freight bill factoring transactions are simple. Once your shipper has been credit qualified, you submit the freight bills to the factoring company, who advances you about 90% immediately. Your company gets the reminder 10% (less fees) as soon as your client actually pays.

Factoring is a flexible solution that should be considered by new and growing transportation companies.

There are a number of challenges that come with owning or managing a successful sub contracting business. One of the bigger challenges involves managing slow paying customers, since they can have a negative impact on your business. For example, most of your General Contractors will want to pay you 30 to 50 days after delivering your services or finishing a stage. However, you need to pay employees and suppliers a lot sooner than that. Unless your company has a substantial bank account, you will soon run into problems unless that is managed properly.

One alternative most subcontractors try is to negotiate quicker payments from their GC’s. However, that strategy doesn’t work very often. Another strategy is to try and get a business loan from your local bank. However, most banks will not lend money to a company unless it has substantial assets and can provide financial statements showing two years of profitable operations. This puts business loans out of the reach of most sub contractors. So what alternatives do you have?

If your biggest challenge is that your clients take too long to pay, you should consider construction factoring financing. Construction factoring offers a simple proposition. The factoring company advances you up to 80% for your invoices on delivered and accepted services (or products). This provides you the necessary funds to operate your business. Once the client pays, you get the remaining 20%, less a service fee.

As part of their services, factoring companies will check the commercial credit of your customers. This helps ensure that they only finance invoices that have a high likelihood of being paid. You can leverage this service, which most factors provide for free, to help ensure that you only work with financially responsible companies. Construction factoring companies take your customers commercial credit into as one of the main requirements to qualify. That means that if you deliver quality services and work for good GC’s or builders, your chances of obtaining financing are high.

If factoring is an option you want to pursue, you should keep in mind that the factoring company will need to verify each invoice it finances. This means that they will call your customer to verify that they are happy with the rendered services. Also, be aware that factoring companies cannot factor invoices in which the GC will only pay you, if and when they get paid.

One of the biggest challenges for construction subcontractors is meeting payroll. Paying employees and suppliers is often hard because get paid 30 to 60 days after they submit their invoices.

Whether we like it or not, this is the way things are done in the construction industry. And, unless the subcontractor has a large cash reserve, waiting 60 days can be close to impossible. Especially, with the never-ending payroll responsibilities.

Going to the bank to get a small business loan or line of credit won’t help much. Banks are notorious for not lending money to subcontractors. Furthermore, banks usually require at least 2 years worth of audited financial statements showing a profit, and their loans can take weeks or months to get setup.

There is an alternative. This alternative can eliminate the payment wait and get invoices paid in a little as 2 days. Getting paid quickly allows subcontractors to easily pay employees and suppliers on time, enabling them to grow their businesses. The name of this financing tool is construction factoring, a special type of invoice factoring. Factoring receivables is an easy way to finance and grow your construction business.

Invoice factoring works as follows:

1. You send a bill to the GC or client for a progress segment or completed job
2. The factoring company advances you up to 80% of the submitted invoice. You get immediate use of the money. The remaining 20% is kept as a reserve.
3. Once your client pays the invoice, the 20% reserve is rebated to you, less a small fee

The biggest requirement to qualify for factoring financing is to do business with reputable GC’s or commercial clients and to have a well-run business. Generally, a factoring financing line can be set up in as little as 5 days.

As you can see, construction factoring provides you with a great tool to finance your growing construction business.

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.

Of all the responsibilities that temporary staffing agency owners have, none is more important than payroll. Employees are the lifeline of the business and making sure they are paid in time goes a long way at ensuring your company has smooth operations. Paying employees on time can be very challenging, especially if a client is late with a payment.

Let’s look at a common scenario for a staffing company. A client leases 10 employees for a short term two week contract. At the end of the two weeks the staffing agency will have to pay the employees. Your client, on the other hand, will get an invoice from you and pay it in 30 to 45 days. Unless you have the funds to pay your employees while waiting for your own payment to arrive – you are going to run into a problem. This situation is unfortunately common in the industry.

The obvious way to solve this problem is with business financing. This is easier said than done. Getting a business loan in Canada can be very difficult. Most banks are very conservative and will only make business loans to clients that can show substantial assets and impeccable financial statements. While these are desirable characteristics, the biggest asset that a staffing agency has is its employees. This makes them hard to finance.

If we look at the problem, it’s fairly simple. It’s the payment gap between delivery of services and payment by the client. One easy way to handle this is to use invoice factoring. Invoice factoring provides a funds advance for the invoice. This gives you the funds to meet your payroll and business expenses without having to wait for your client to pay.

Most transactions are structured with two payments. The first payment varies but it’s usually about 85% to 90% of the invoice. This payment is given to you as soon as you submit the invoice for financing. The remaining 10% to 15%, less a fee, is advanced once your client actually pays for the invoice.

One of the big advantages of factoring is that it’s easy to qualify for. The most important requirement is that your client have solid credit and the ability to pay the invoice on time. This makes it a great alternative for growing staffing agencies.

Financing any business in the current credit environment is extremely difficult. Banks and many financial institutions are retrenching their credit facilities, forcing companies to look for financing elsewhere. One of the business sectors that has been hit the hardest is manufacturing.

Manufacturing companies tend to be cash flow intensive businesses. They are constantly paying suppliers and employees. There are equipment, payroll, supplier and rental expenses to handle. Most managers (or owners) will do their best to keep up to date with these payments, or they risk getting their company into trouble. What usually gets cash flow into trouble is that most clients pay their invoices in 30 to 60 days. Basically, most owners need to pay suppliers before they get paid by clients. Therefore, unless the company has a cash reserve, it will run into problems.

This situation can be fixed with business financing. Unfortunately, getting a business loan is the current environment is very challenging. Business loans are simply not available to companies unless they have stellar credit and impeccable financials.

But let’s review the problem though. The issue is the timing difference between when expenses are made and when payment is received. If you accelerate the payment, the problem is solved.
How do you accelerate a payment? One way to accelerate a payment is to finance it through a factoring company. When you factor an invoice, you assign it to a factoring company who gives you an advance payment for it. This accelerated payment can be used to pay corporate expenses therefore alleviating the pressure on your cash flow. The transaction is settled once your client pays the invoice in full. Factors will charge a fee for their services, usually a percentage of the invoice.

In an invoice factoring transaction, the factoring company is buying your invoice, rather than lending your company money. Since the factoring company is buying your invoice, the commercial credit of your customer (who actually pays the invoice) is very important. Because of this, many companies with good customers can qualify for factoring financing, even if they are startups or have some financial difficulties.

Managing the expenses of a growing transportation company involves a fair amount of juggling. There are fuel payments, driver payments and the constant need for repairs. Juggling becomes a need because most clients take 30 to 60 days to pay their freight bills, while expenses happen constantly. Although large carriers or brokerages may be equipped to handle costs while waiting to get paid, few small carriers can.

One way to solve this problem is to ask customers for quick pays. Many times, that strategy will work. But you will always be at the mercy of your customer. Another alternative is to secure business financing – through a business loan or through freight bill factoring.

Freight factoring works by giving you an advance against for freight bills and is ideal to handle slow paying clients. The advance payment comes from a factoring company rather than from your client. This eliminates having to wait for your customers to pay, and provides you with the needed funds to cover business expenses.

For many transportation companies that are dealing with slow paying customers, freight bill factoring will solve this problem better than a business loan would. It targets the problem at its source since freight factoring is designed to help with slow paying customers. Freight factoring is flexibly and adapts itself to your monthly billings – growing and shrinking as necessary. More importantly, it’s easy to obtain. The biggest requirement to qualify is to have good credit worthy commercial customers. So even a startup company, whose biggest asset is a strong roster of clients as a good chance of qualifying.

A typical transaction would work as follows. The carrier sends the freight bills and other information to the factoring company, who then issues an advance of 90% (sometimes this can be higher). Once the invoice is actually paid by the customer, the factoring company rebates the remaining 10%, less its fee. Fees vary and are based on volume of your billings and the quality of your clients.

Although not a cure all, factoring can be a great solution for companies that can’t afford to wait 30 – 60 days to get paid by clients.

Running a staffing agency requires a combination of good sales skills along with solid organizational skills. As an owner (or manager) you need to make sure that you are signing on new clients who will use your staff. At the same time, you need to recruit quality staff that will ensure that you meet your client’s expectations. And while you do this, you also need to make sure that payroll is handled so that your team is always paid on time.

For many staffing agency owners, this last point can be a real problem, especially if the company is starting up or growing too quickly. Most commercial clients will be happy to use your staff for a contract, but they will pay their invoices in 45 to 60 days. In the meantime, your company needs to cover all employee payroll. You have to pay salaries, retain taxes and cover any benefits you offer. Many agencies just can’t afford to wait that long to get paid.

Most agency owners will opt for a line of credit, if they can qualify for this form of business financing. But qualifying for a line of credit, or a business loan for that matter, can be very difficult. This is especially true for staffing agencies that have no hard collateral. As it’s well known, most institutions provide business loans to companies that have both, the earning ability to pay the loan back and enough collateral to cover the loan if they can’t pay it back. Because of this, only staffing agencies with good track records, solid customers and seasoned management teams get institutional financing.

Unless you manage to get external funding, your staffing agency’s growth will always be limited by your capital. However, there is one funding alternative that will help solve your problem. If you look at the situation, you’ll see that the problem is one of timing. You need to pay employees now, but your clients want to pay later. And the way to bridge this gap is to get an advance on your client invoice. This provides you with the funds to meet your current obligations and handle new projects.

This solution is called invoice factoring and is offered by factoring companies. A factoring company considers your accounts receivable (invoices) from good clients to great collateral. Because of that, they are willing to advance you funds against those invoices. One advantage of factoring is that it helps you meet your current liabilities. A bigger – and often ignored – advantage is that it can help your company to bid for bigger contracts. How is that? Many staffing agencies have been able to win very large contracts and then arranged to factor their invoices before their payroll is due. The potential of this strategy is obvious. When done correctly – and it does take good organizational skills – it can help grow your company very quickly. Because of this, accounts receivable factoring can be a great tool for staffing agencies with good growth potential.

The logistics and transportation industry plays an important role as the backbone of the economy. Even in recessionary times, many companies in this industry can do very well if managed properly. One of the main challenges of transportation though is that it can be very cash intensive. Trucking and logistics companies have to pay for drivers, trucks, repairs and fuel. All of these expenses tend to add up very quickly. To complicate matters, most shippers will pay their invoices in 30 to 60 days. This creates a cash flow problem for many companies since they have immediate expenses but a delayed income.

If the company has a big enough capital reserve, this cash flow gap is not a problem. This is seldom the case though and most transportation companies try to get business financing to help them grow. Although business loans and other forms of financing are available to large companies, small companies don’t usually qualify for these products.

One alternative solution to this problem that works very well is freight bill factoring. Basically, it eliminates the payment wait and provides you with the funding to pay your business expenses as you incur them. This gives you the necessary breathing room to pay expenses while you are waiting for your clients to pay their invoices.

Transportation factoring is that is relatively easy to obtain – partly because of how the transaction is structured. Most factoring companies don’t lend money per se. Rather they buy your invoice at a small discount, providing an upfront payment. You usually get around 90% (this varies) upfront, and the reminder 10% (less the discount) once your client pays. Since the transaction is structured as a purchase rather than a business loan, the criteria for qualifying are different. For example, since the factoring company is actually buying your invoices from you, their biggest concern is the credit worthiness of your client. This means that small companies with a good list of clients can usually get this form of business financing.

The cost of freight bill factoring is usually based on the credit worthiness of your client, the length of time that the invoice is outstanding and your monthly sales volume. Obviously, companies with really good clients, high volumes and shorter invoice outstanding times will have lower costs.

Starting or growing a transportation company in the current economic environment is very challenging. At the same time, it can be very profitable, especially for business owners who know how to manage their businesses well. This can be the right time to position your company for growth.

Transportation companies – freight brokers and carriers – operate with very tight cash flows. They have to pay for drivers, fuel, repairs and employees regularly. However, their clients always delay their payments by 30 to 60 days. This puts most companies on shaky ground. It’s impossible for the company to grow, if the owners needs to worry about clients paying on time. And sometimes a single delayed payment can throw the whole company into a tailspin.

So what is the solution? Well, you can try and negotiate a quick pay. If that fails, your other option is to try and secure business financing. However, getting a business loan in this environment is very difficult. Given all the new institutional credit restrictions, business loans are hard to obtain unless your business has pristine credit.

One alternative is to use freight factoring, a specialized for of factoring that is available to the transportation industry. With freight bill factoring in place, you no longer need to worry about when your client payments will come, or whether they offer quick pays. The factoring company gives you an advance for your invoices, which provides the cash flow to run and grow your business. Instead of focusing on how to collect from your clients, you can focus on getting more clients and on running your company more efficiently.

Freight factoring can be relatively easy to obtain and you will find that most factoring companies offer flexible terms to transportation carriers and brokers. And as opposed to institutional financing, most factoring financing lines can be setup very quickly, enabling to reduce or eliminate your cash flow problem very quickly.

One of the toughest challenges that business owners face is that clients never want to pay their invoices immediately upon receiving the service or the product. Most clients, especially large corporations, demand to be given 30 to 60 days to pay their invoices. Offering trade credit, as providing net 30 day terms for payment is usually called, is very common in commercial transactions. It’s the way business operates. And when done correctly, it can be very safe and give you an advantage over competitors that can’t offer net 30 terms.

But should you offer this to any client just because they ask? No, not without doing a little bit of research about your client.

There are two simple ways to research a client. The first one invoices getting a commercial credit report from either Dun and Bradstreet or from Smart Business Reports. A commercial credit report, which anyone can buy, provides useful information about your clients. It shows liens, judgments and more importantly, it shows how quickly your client pays their invoices. The payment history is the most important piece of information on the credit report. Most reports will also give you a credit score and a credit recommendation. You can buy these reports by going to Dun and Bradstreet’s or Smart Business Reports respective web sites.

However, not ever company has a credit file with Dun and Bradstreet or Smart Business Reports. This is especially true for small and medium sized companies that don’t have a wide exposure. In that case, your best alternative is to ask your client to submit a credit application which includes references. Be sure to check on those references and about their payment experience and average outstanding volumes.

What if your problem is that you cannot wait 30 days to get paid because you need funds to run your business? One alternative is to go to an institution to try and obtain business financing. However, in this economy, getting a business loan is very hard. Another alternative is to factor your invoices. Invoice factoring is a form of financing that give you an advance for your net 30 invoices. It provides the working capital you need, without having to wait for your clients to pay you first.

Author: This article was authored by Marco Terry of Commercial Capital LLC and remains the exclusive property of Marco Terry/Commercial Capital LLC

Trying to get business financing for a transportation company in the current economic environment has been nearly impossible. This applies to both trucking companies and freight brokers. Most institutions are imposing a number of restrictions on their financing activities to the point where getting a business loan is very difficult. It’s not that institutions don’t want to make business loans – but rather – they have to be extra careful. For example, many institutions now require company financial statements for multiple years that must show profits. They need substantial assets as collateral, and usually require the business owner to have substantial assets themselves.

But, what happens if you can’t meet this criteria? Are you basically out of luck? Not really. You just need to look elsewhere.

Let’s look at a common problem in the transportation industry – cash flow. This affects brokers and carriers alike. They have expenses that they must cover immediately, such as drivers and repairs. However, they must also wait up to 60 days to get paid by their clients. If they don’t have a cushion of capital to bridge the gap – their businesses fail. There is an alternative though – it’s called factoring.

Factoring your freight bills bridges this gap in a simple and elegant way. It provides you with an advance on your freight bills, which you can use to cover your expenses. The transaction is then settled when your client pays the freight bill.

Freight factoring has a number of advantages and is easy to qualify for. Most factoring companies look at the credit of your client as the most important requirement (though not the only one) to provide financing. Although your client’s credit is important, your company should be free of liens, judgments and tax problems.

Freight bill factoring is an ideal source of financing for startup and growing transportation companies, it provides financing to cover operational expenses while you focus on growing your business. One if the biggest advantages of freight factoring is that is tied to your sales – your financing line grows as your business grows.

As a trucking company owner, you know that the transportation industry is very profitable. And, it’s safe to say that the industry will grow steadily for the years to come. If only because people are buying more things and someone needs to haul the stuff around. There has never been a better time to own a trucking company.

There are three keys to growing your trucking company successfully.

First, find truck loads of cargo and freight

The key to winning in the trucking game is to find clients with truck loads of freight that need to be hauled. There are a few ways to do this. Many owners rely on the internet and go to freight boards or load boards to try and get loads. This is a good strategy because there are a number of reputable boards that can certainly keep your business humming for a long time. Another advantage of truck boards is that they help you reduce your infamous deadhead trips – trips where you are returning home without hauling anything.

Second, work with reputable clients and freight brokers

Although load boards are great, you also want to work with established freight brokers reputable freight broker will help you get loads so that your trucks are always running. They will also help with the proper paperwork and documentation, and lastly, they will ensure that you get paid.

However, not all freight brokers or clients are created equal. Be sure to check them out before doing business with them. You can do this by asking them for references or by checking their commercial credit.

Lastly, get the right financing

Waiting up to 60 days to get paid for your freight bills can put your trucking business in neutral very quickly. Your best option is to finance your freight bills using factoring. Freight bill factoring provides you with money for your slow paying freight bills, giving you the funds to pay for fuel, drivers and repairs.

Putting it all together

Making it big with a trucking company is not hard – you just have to be smart. Be sure to get the right clients and the proper financing, and watch your business grow.

Trucking company owners know that cash is king and prompt paying clients are critical to the company’s success. But, what can you do if you get a good client that insists on paying their invoice in 30 days or more? How do you pay fuel, drivers and repairs while you wait to get paid?

In the past, the only option you had was to take the client and grit your teeth.

However, there is an option that has been gaining popularity with the trucking community. It’s called freight bill factoring. Freight factoring eliminates the payment wait and gets your freight bills paid in a couple of days. But, transportation factoring is very different than a business loan. It works by selling your freight bills to a freight factoring company, who pays you for them and then waits to get paid by your customers/freight brokers.

Transportation factoring can be easy to use and works as follows:

1. You deliver the load and issue a freight bill
2. You sell the freight bill to the factoring company, who pays you a first installment of 90% to 97% of the freight bill
3. You get immediate money while the factoring company waits
4. Once the factoring company gets paid, any remaining reserves (less a small fee) are returned as your second installment

Freight factoring rates vary, but they go from 1.5% to 3% per 30 days depending on volume, duration of transactions and customer selection. A factoring line can be established in a little as 3 days, provided you have all your company documentation in order.

As a trucking company owner you are very aware that transportation companies are quite demanding when it comes to cash flow. They need regular cash to be able to meet all the ongoing expenses. As long as cash is coming in at a nice rate, your trucking company operates like a well-oiled machine. But if there is a hiccup in the cash flow, the well oiled machine starts creaking. And if there is a major cash flow problem, gears start flying all over the place and the so-called well oiled machine comes to a grinding stop.

What is the biggest source of cash flow problems for small and mid sized trucking companies? Slow paying clients. Clients that take up to 60 days to pay their freight bills. Although large trucking companies can certainly handle waiting – small trucking companies with few power units usually cannot afford the wait. As an owner, you need the money and you need it now.

Is the solution to turn away slow paying clients? Absolutely not. That would be business suicide. The solution is to eliminate the wait by financing your freight bills using freight bill factoring.

The concept behind factoring is very simple. Factoring companies provide you with cash for your freight bills. Usually in 24 hours or less. You get immediate funding while the factoring company waits to get paid. With factoring, you get immediate money for your slow paying freight bills, which allows you to pay drivers, maintain power units and buy fuel.

Factoring is very easy to qualify for and very common in the trucking industry. Most trucking companies can easily qualify since the main requirement is that they do business with good (although slow) paying clients. It allows you to easily do business with clients that pay in 30 to 90 days and eliminates the stress of having to wait to get paid.

How does freight factoring work? It’s simple:

1. You deliver the load and submit copies of the documents to the factoring company
2. The factoring company advances you about 90% of the freight bill in 24 hours (the remaining 10% is used to cover billing disputes). You get money almost immediately
3. Once the factoring company is paid by the client, the remaining 10% (less a small fee) is rebated to you

As you can see, factoring eliminates the wait to get paid and gives you the cash you need to run your trucking company.

Running a successful trucking company requires three things.

1. Finding truck loads of freight
2. Moving the truck load from point A to point B
3. Managing all the little details so that 1 and 2 happen successfully

Sounds easy, doesn’t it? However, most trucking companies fail because of the little details that go wrong. Repairs are missed, so trucks stop working. Drivers are not paid on time, so the drivers quit. Fuel is not paid for, so the trucks stop moving freight. Although the problems may look entirely unrelated, they are connected. They all indicate that there are cash flow problems. What is worse, your company may be doing great and invoicing a lot, and still have cash flow problems. That is why most owners don’t find out about the problems until it is too late.

Trucking companies need money to keep running. Actually, they need more money than traditional companies. Money to pay drivers. To pay for fuel and repairs. To run their business. In the transportation industry, you surely need to spend money to make money. Otherwise, try hauling a load in a truck that does not have fuel….or a paid driver.

The biggest cash flow challenge that trucking company owners have is waiting up to 60 days to get paid for their freight bills. Slow paying clients can limit your cash flow and potentially drive you out of business.

Fortunately, trucking companies have a great financing option that is easy to qualify for. It is called freight bill factoring. Freight bill factoring provides you with immediate money for your freight bills and eliminates having to wait to get paid by your clients. It provides you with the necessary funds to repair your trucks, pay your drivers and keep up with fuel expenses.

Freight bill factoring is really easy to do and set up. And more importantly, once you set it up, it can provide you with ongoing continuous funding. This enables you to turn invoices into cash almost immediately, and use the money to grow your company.

Growing your trucking company does not have to be a financial challenge. Factoring freight bills can help you finance your way to success.

The Canadian trucking industry has been in a period of growth. In recent years, many entrepreneurs have launched small and midsize trucking companies and have gone to the roads, trying to build a better future.

Many company owners succeed. Others fail. What is the difference between them? Being able to find high paying loads? Lack of opportunity? Probably not. I think that the biggest reason many trucking companies fail is plain and simple: lack of proper financing.

But, if you are a small or mid sized company owner, where can you get the money to finance your business? From the bank? Not likely. First, a business loan is not always the right type of financing for a trucking company. Second, business loans are just hard to obtain and very inflexible. Let’s look at the situation from an owner’s perspective.

The biggest challenge that trucking companies have is slow paying customers. Customers that want to pay their freight bills in 30 to 60 days. If you consider that most of your expenses need immediate payment and can’t wait, you can see why the numbers simply don’t work.

What you need is a financing program that finances your sales and eliminates the 60 day wait, providing you with funding as soon as you invoice your customer. The solution to this problem is to factor your freight bills. But your local bank does not offer freight bill factoring. Freight factoring is offered by a factoring company.

Freight bill factoring accelerates payment for your freight bills and provides you the money you need to pay fuel, expenses and drivers. It gives you the cash flow you need to take on new loads, hire drivers and grow your business. It’s simple to use and works as follows:

1. You deliver the loads and invoice your clients
2. You send a copy of the freight bill to the factoring company
3. The factoring company advances you up to 97% of your invoice
4. You get the money to grow your business, The factoring company waits to be paid
5. Once the client pays, the transaction is settled. Any held reserves are rebated back

As you can see, freight bill factoring enables you to get the money you need, when you need it. It streamlines your cash flow and helps you run and grow your trucking company more efficiently.

Owing a trucking company or logistics company (freight brokerage) can be very profitable. At the same time, transportation companies tend to be cash hungry. There are fuel expenses, employee expenses, operator expenses, repair expenses and many other expenses that need to be paid quickly. However, most customers don’t offer quick-pays and usually pay their freight bills in 30 to 60 days.

This creates a major challenge. Why? You have expenses that need to be paid quickly and customers that want to pay slowly. Unless your company has some available funds, you will most likely run into problems.

Many company owners try to address this cash gap by trying to get business financing from their bank. However, they soon learn that banks seldom provide business loans to small transportation companies. Unfortunately, a business loan is not an option for most logistics and transportation companies. So, what is?

In many cases, trucking companies have an option that is better that a small business loan. It is called invoice factoring. Factoring can provide logistics companies with the financing they need to meet their current expenses and grow. And, as opposed to bank financing, factoring is easy to obtain and can be setup in about a week.

So what is factoring? Factoring provides companies with an advance on your slow paying freight bills. This enables them to meet expenses while waiting to get paid by customers. It works as follows:

1. You company delivers the load and invoices the customer
2. The factoring company provides you and advance of up to 90% of your freight bill
3. You can use the advance to meet all expenses
4. Once your customer pays, you’ll get the remaining 10% less a small factoring fee

The cost of factoring can be anywhere between 1.5% to 3% per month. The cost is determined by your industry, the quality of your customers (who pay the freight bills) and the amount of financing you require. Freight bill factoring is a great solution for logistics and trucking companies and can help grow your company to the next level.

Working capital is the lifeblood of a transportation company. Whether you own a carrier or a brokerage, you constantly need to juggle fuel payments, repairs and driver salaries. What makes the business challenging is that most customers pay for their freight bills in 30, 50 or even 60 days. Slow customer payments put a strain on your cash flow. This makes running the business very hard and sometimes makes growth impossible.

One obvious solution to this challenge is to look for business financing. Ideally a business loan can be used to strengthen your bank account and help cover any gaps in your cash flow. However, qualifying for business loans can be challenging as there are many requirements that you’ll need to meet. This includes having audited financials, two to three years of profitable business experience and meeting the financial institutions collateral requirements.

There is another alternative though. Suppose that you could get an advance on your clients slow-paying invoices. So instead of waiting – you would get paid a substantial amount. If you consider this for a moment, you would realize that most of your working capital problems would go away. You would have enough funds to pay for fuel, drivers and repairs. And there is one way to achieve this – it’s by factoring your freight bills.

Factoring provides an advance on your slow paying invoices. The advance is usually about 90% of the invoice, with 10% held in reserve. The 10% reserve is returned to you, less a small service fee, once the invoice is fully paid for.

Invoice factoring has a number of advantages. For starters, it’s easy to qualify for. The biggest requirement is that you do business with credit worthy clients. Aside from that, you must own a well run business with good prospects for growth.

Another advantage of accounts receivable factoring is that you funding line is tied to your sales. This makes invoice factoring a dynamic financing product, were your line increases as your sales increase. This is an ideal solution for transportation companies with solid growth plans.

Is your trucking company or freight brokerage stuck in neutral? One of the biggest challenges that you will face as a transportation company owner is dealing with clients that don’t offer quick pays, and instead, pay freight bills in 30 to 60 days. This can be very challenging for new and growing companies since you have expenses that need to be paid now, such as suppliers, repairs, rent and drivers.

One alternative is to try to negotiate quick payments from your clients. However you may soon find that your pleas will meet deaf ears – clients pay in 30 days because they have to. That is how they manage their own cash flow. Another alternative is to go to a bank for business financing. However, getting a business loan can be challenging. Banks will not offer small business loans to companies that don’t have, at a minimum, 2 years of profitable operations and a solid balance sheet.

There is an alternative, however. And often, it is better than a conventional business loan. It’s the ultimate quick pay tool and it does not require that your customer pay any sooner than they do now. This solution is called freight factoring.

Factoring financing provides you with an advance of 90% (sometimes even more) on your freight bills, as soon as the load is delivered. This gives you the necessary working capital to pay business expenses – drivers, rent, fuel and repairs. The remaining 10%, less a small fee, is advanced once the freight bill is actually paid by your customer.

Factoring freight bills offers a number of advantages over conventional business loans. It is easy to get and can be set up quickly, usually in a matter of days. But unlike a line of credit which usually has limits, invoice factoring has none. It is tied directly to your sales and your growth. In other words, your financing line is directly based on your ability to grow your trucking company or freight brokerage.

Few banks offer factoring financing so you’ll have to go to a factoring company if you want to get this type of financing. Fortunately, it’s becoming quite popular and there are a number of factoring companies that offer competitive products.

And how much does factoring cost? It’s surprisingly competitive. Monthly rates vary and will be based on the credit quality of your customers and the amount of financing you need. Generally, rates go from 1.5% per month for a high volume account to 3.5% for a smaller account. So, if you have a transportation company that is on the grow, be sure to consider transportation factoring financing.

Running a transportation company, a carrier or broker, has always been a financially rewarding career. When run properly and professionally, they can grow beyond your expectations. At the same time, they present financial challenges as well. Transportation is a cash intensive business with many expenses that can’t wait. There are drivers, fuel and repairs that must be paid for. However, clients can take a long as 60 days to pay their freight bills.

Waiting up to 60 days to get paid can be very taxing, especially for new or rapidly growing companies. Few have the required cash reserves to cope with the increasing expenses of growing a venture. One traditional alternative is to look for a business loan. However, business loans are not always suited to handle operational expenses. They are better suited for buying assets, such as trucks. There is a form of business financing that is ideal for funding operational expenses. It’s called factoring and it’s offered by factoring companies.

Factoring freight bills provides carriers and logistics companies with immediate liquidity and enables them to meet business expenses on time. It eliminates the juggling act of managing client payments and business expenses, greatly streamlining business operations. Basically, when used properly, freight bill factoring provides an effective platform for growth.

Freight factoring, as it is commonly known, integrates very well into transportation companies. It works by providing an advance of up to 90% on your invoices. The advance is provided immediately upon invoicing. You get the balance (the remaining 10%), less the financing fee, once your clients pays for the invoice in full.

By using freight bill factoring, you are doing the equivalent of putting your business on a Cash on Delivery (COD) basis. This simplifies operations as you limit (or even eliminate) worries about collections and payment tracking.

There are two important requirements needed to qualify for invoice factoring. First, your company must do business with good clients. This means that they must be reputable companies that pay their invoices in 30 to 60 days. Second, your company must be free of liens and legal issues. What makes factoring freight bills different than conventional loans is that startups can successfully obtain financing provided they have a roster of solid customers.

Factoring does not work in every situation though. It works best if your main challenge is that you can’t wait 30 to 60 days to get paid by clients.

Owing a freight brokerage business can be very rewarding and profitable. But as a freight broker, you know that your business is very cash intensive. Your drivers depend on you to be paid on time. However, clients can take up to 60 days to pay for their loads.

So you end up caught in the middle. Caught between drivers that need cash now and clients that want to pay slowly. The math does not work. And unless you have a nice cash cushion in the bank, something has to give.

Trying to get a business loan won’t help. Banks only give business loans to companies that have a great history and solid track record. But what if your track record isn’t great or if you are a startup? What if you have no history but have a great future potential? If that is your situation, your financing will need to come from another source- a factoring company.

Factoring companies are experts at financing businesses with little past history but great future prospects. Basically, the factor eliminates the 30 to 60 days it takes to get your freight bills paid. With factoring, you get your freight bills paid in about 2 days. That gives you the cash you need to pay drivers and meet other business expenses.

Factoring is flexible and grows with your company. As opposed to having arbitrary limits like business loans or lines of credit, factoring limits are driven by your sales. The more you sell, the more financing you qualify for.

Here is how factoring works:

1. You submit a copy of your freight bills to the factoring company
2. The factor advances you between 90% to 98% of your freight bills (sometimes they hold a small reserve)
3. Your get immediate use of the funds. The factor waits to get paid.
4. If the factor held a reserve, the reserve is rebated as soon as your customer pays the freight bill

Factoring costs are driven by three variables:

a) monthly financed volume,
b) your customer credit worthiness and,
c) how long the freight bill goes unpaid.

As a rule of thumb, rates go between 1.6% to 3% per month, depending on these variables.

Factoring freight brokers is a specialty type of factoring and not all factoring companies offer it. However, those that do will help you succeed beyond your expectations.

Running a freight brokerage can be very profitable. Although being a freight broker can be very rewarding, financially speaking, it can also be very challenging. Especially since drivers depend on you to pay them quickly. And many times, your clients make you wait 30 to 60 days before they pay you.

So you have a challenge. Your drivers want to get paid quickly but your clients want to pay slowly. The math doesn’t work. Unless you have a nice cash cushion in the bank, paying your drivers will be a problem. And trying to get bank financing will get you nowhere. Banks always provide financing based on your past history. What if you are a new or expanding freight broker?

A better solution is to finance your freight bills through freight broker factoring. Freight factoring provides you with immediate money for your freight bills, giving you the necessary funds to pay your business expenses and most importantly – your drivers. And, as opposed to bank loans, freight factoring is easy to obtain. While banks usually look at your past history to make their credit decisions, factoring companies look at your future potential. The main qualification requirement is that you do business with credit worthy clients that pay on time.

If you are a freight broker, factoring your freight bills may be a little bit different from traditional factoring. Most factors will team up with you to find a solution to pay your drivers on time, since this is essential. Others may even pay your drivers on your behalf, helping you handle back office tasks.

Freight broker factoring works as follows:

1. Once the freight has been delivered, you send copies of the documents to the factor
2. The factor advances you up to 100% (less fee) of the freight bill
3. You get immediate use of funds, while the factor waits to get paid
4. Once the client has paid, the transaction is settled

One of the big advantages of factoring is that it is easier to get than a business loan. And, as opposed to business loans, factoring financing grows with your business. The more you invoice, the more financing you qualify for.

If you own a trucking company, you know that it can be a very profitable business. However, you also know that trucking companies are very cash hungry. You need money to pay for the equipment, to pay your drivers and for fuel. The challenge comes from the fact that freight bills can take up to 60 days to get paid. Unless you have a lot of cash in the bank, this can be a problem.

Speaking of banks, going to your banker for a business loan or line of credit will not help much either. Bankers will only lend money to companies that have a lot of assets, have been in business for three years and can provide audited financial statements. Of course, if you had lots of assets you wouldn’t need a banker.

So, what are your options?

Freight bill factoring, also known as freight factoring, can provide you with immediate financing for your slow paying freight bills. So, if you have quite a few invoices that are paying slowly, factoring can help you.

The factoring arrangement is very simple. The factoring company advances a large portion of the money owed for your freight bills the moment you invoice your customer. They wait to get paid while you get immediate use of the money.

As opposed to bank financing, freight bill factoring is easy to qualify for and available to small and large trucking companies alike. Most factoring companies have two main requirements. The first one is that you work with reliable clients and freight brokers. The second one is that your firm has at least two trucks. It’s easier than a bank, isn’t it?

If you own a trucking company that is growing, be sure to consider freight factoring.

Managing cash flow is one of the biggest challenges that transportation company owners have today. This applies both to carriers and freight brokers who must balance slow paying clients and suppliers that demand quick payments. It is not uncommon to have clients that pay in 30 to 45 days and drivers and suppliers who want to be paid quickly.

This is particularly challenging for new and growing companies who may not have strong cash positions. Traditionally, business owners deal with this problem by asking clients for quick payments. Sadly, this strategy seldom works as clients, who usually have the upper hand, will insist in paying in 45 days. An alternative that many consider is obtaining business financing through their local institution. However, most will not qualify for a business loans as banks usually have strict lending criteria. So, if a business loan is not an option – what is?

Fortunately there is a solution and it involves factoring your freight bills. This type of financing provides you with the cash flow you need to pay your business expenses and grow your company. Freight bill factoring provides you with a 90% advance (or higher) on your freight bills. Once your client pays the freight bill, you get the remaining 10%, less a small fee.

Invoice factoring has a number of advantages over conventional financing. First, it’s very easy to obtain. The biggest requirement is that you do business with reputable and credit worthy clients. Second, it can be setup quickly, usually in a matter of days. But more importantly, freight factoring is flexible and tied to your sales. This means that your financing levels increase as your sales increase.

Invoice factoring is also cost effective. Costs vary based on a number of parameters, but they range between 1.5% and 2.5% per month. When used properly it can help your company grow dramatically and serve as a crucial stepping stone to eventually obtaining bank financing.

Growth in the trucking industry is all about freight volume. The more freight you move, the faster your company will grow. But big volume comes with a catch – slow paying customers. Unfortunately, waiting 30 to 45 days to get paid is very common in the industry.

But what if you cannot afford to wait 45 days to get paid by your clients? What if you need to buy fuel, pay drivers or pay for repairs? Employees and suppliers seldom like to wait to get paid.

Needless to say, going to the bank for financing is not an option. They usually do not like to finance small and mid sized businesses. Unless, of course, you have tons of assets, three years worth of financial statements and you have great credit.

So, now what? What are your options?

If you own a trucking company, there is a solution that will provide you with plenty of financing. And as opposed to bank loans, this financing is tied to your freight bills. The more you invoice, the more financing you qualify for.

This solution can provide you with the necessary funds to buy fuel, pay drivers and pay for repairs. And it is available to freight companies of any size. The solution is called freight bill factoring (or freight factoring for short).

Freight bill factoring works as follows:

1. You deliver the freight and invoice your customer
2. You send a copy of the freight bill to the factoring company
3. The factoring company advances you up to 90% of your invoice (10% held in reserve)
4. Once the factoring company gets paid, they rebate you the remaining 10% less their fees

As opposed to bank loans, factoring has no arbitrary high limits. You can factor as many freight bills as you can generate. So, as your company grows, so does your financing.

Factoring is a great tool to finance growing trucking companies that need money to grow. It allows you to take on new opportunities to drive your company to the next level.

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.

Invoice 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.

Factoring is a cost effective solution that can help you drive your freight company to the next level.

The trucking industry is growing by leaps and bounds. It is a well-known fact that the industry will grow consistently for the next decade. Basically, trucking companies are delivering truck loads of freight every day and are growing quickly and profitably. They are an engine that is driving the economy.

This is all good news for trucking companies, at least for those that can deal with the challenges of paying for repairs, fuel and meeting payroll on time. This can be challenging for a new and growing company, since most clients pay their freight bills in up to 60 days. Waiting can kill the business.

Of course, going to the bank for money won’t help. Banks only finance businesses that have good cash flow, lots of assets and can provide three years worth of financial statements. Of course, if you could meet those requirements you would not need business financing.

A better option is to factor your freight bills. Freight factoring can provide you with money to pay for repairs, fuel and drivers. And as opposed to bank financing, factoring is easy to qualify for and simple to use.

Here is a sample transaction:

1. You sell your freight bill to the factoring company
2. The factoring company advances you up to 95% of the bill (90% is more common. Sometimes a small reserve is held)
3. Once the freight bill is paid, the fee is charged and any reserves are rebated

The main requirement of factoring is that you do business with credit worthy clients that pay their invoices consistently. The service can generally be set up in a few days, and once it’s set up, the financing is continuous.

As an added service, factoring companies will also check the creditworthiness of your new prospects, enabling you to only do business with clients that will pay their invoices on time.

Many trucking company owners have used freight bill factoring to grow their transportation companies, enabling them to take on new loads, and add equipment while easily keeping up with expenses. Factoring can help you drive your trucking company to financial success.