Most transportation companies  – carriers and brokers alike – will need financing at one time or another to be able to grow past the investment of the original owners. In part, this stems from the fact that the industry is very competitive and margins can be thin making it difficult to build cash reserves.  Also, most shippers pay their freight bills in 30 to 60 days, which combined with minimal cash reserves can create cash flow problems.

Slow revenues and thin margins can create a dangerous combination that leaves transportation companies vulnerable to unpredictable events – such as a slow customer payment, a major equipment breakdown, quick payment demands from drivers or fuel increases. Well capitalized companies can handle these events simply by tapping into their cash reserves. But growing companies, or companies with minimal reserves, run the risk of running into serious problems.

You can certainly minimize these cash flow problems by optimizing how you manage your accounts receivable. For example, you should run credit reports to make sure you only work with shippers that will pay for their loads on a timely basis. Additionally, you should always make sure that all the proper paperwork (e.g. freight bill, bill of lading, etc) is in order. Lastly, you should consider offering discounts in exchange for quick payments. But this strategies do have their limitations.

Although optimizing your invoicing processes will definitely help,  most transportation companies will ultimately need business financing to be able to grow and succeed. Usually, company owners will approach their local institution to try and get a business loan. However, getting a business loan in the transportation industry is very difficult for carriers and nearly impossible for brokers. Furthermore, institutions will usually require that the company present three years of pristine financial records. Also, they will only work with companies that have substantial collateral and whose owners have a solid net worth. Ultimately, few transportation companies will be able to meet this criteria.

However, there is a new alternative way to finance transportation companies that has been gaining traction in recent years. It’s called freight bill factoring. Factoring accelerates the cash that is due to your company from slow paying freight bills. It provides the quick liquidity you need to pay for company expenses – such as drivers, fuel and repairs – without having to worry about the timing of your shippers payments.

Freight bill factoring transactions are usually structured as two advances against your freight bill. The first advance usually averages 90% and is paid as soon as the load is delivered and invoiced for. The second advance, which is the remaining 10% less the fee, is paid once the shipper pays the invoice in full.  The factoring fee varies and is calculated based on the credit quality of your shippers, the size of your advances and the volume of invoices that you factor.

Perhaps one of the most important advantages of using freight factoring to finance your transportation company is that it’s easier to get than most conventional forms of business financing. Since factoring companies are funding your invoices – they view them as your most important collateral.  To qualify, it’s very important that your shippers, who pay your invoices, have very good commercial credit ratings. Also, your invoices must be free of any encumbrances created by tax or legal problems.

Freight bill factoring is also very flexible. Most conventional business financing solutions , like lines of credit or business loans,  have fixed ceilings. Factoring lines tend to have ceilings that are directly tied to your sales. This means that the line can grow along with your company, provided that you are selling to shippers that have solid commercial credit ratings. This makes freight factoring an ideal solution for small and medium sized transportation companies that have substantial growth opportunities but don’t have the cash flow to execute on their growth plans.

Although the economy is recovering from a recession, for many freight carriers and brokers the current environment does not feel like an economic recovery at all. New business is harder to come by and cash flow pressures have increased as customers are paying their invoices slowly. Having tight cash flows is a very common problem in the industry, and leaves companies in a precarious position. This is because small carriers have many obligations – such as trucks, fuel and drivers – that need to be paid periodically and few can afford to wait for slow paying customers.

One way to solve this problem is to start requesting faster customer payments. This can sometimes work, especially if you offer your shippers a discount for paying early. Offering 2% for a payment in 10 days or less is quite common . The problem with this strategy is that you are still at the mercy of your customer who may – or may not – pay quickly.

A second way to solve this problem is to get conventional business financing such as a loan or line of credit. While a line of credit would certainly help address this cash flow problem, they are very difficult to obtain in this environment. Banks are notoriously risk averse and will usually demand strong collateral, a long track record and impeccable financial statements before providing financing. The problem is that few, if any, small carriers (or brokers) will meet this criteria.

A third alternative to solve this problem is to use freight bill factoring, a form of financing that can be used to speed up payments from slow paying shippers. It works by using a third party company, called a factoring company, that provides a cash advance for your slow paying invoices. The cash advance can be used by your company to cover expenses and take on new opportunities. The transaction closes once the customer pays the invoice in full. It’s common for carriers and brokers to factor invoices on a regular basis, thus ensuring smooth cash flow.

One advantage of freight factoring over other solutions is that it’s easier to obtain. The most important requirement to qualify is that your shippers need to have good commercial credit. This is important because their invoice is the collateral that the factoring company is financing. Aside from this, your company needs to be properly established and be free of legal and tax problems. Another advantage of invoice factoring lines is that they can be implemented very quickly. It’s common for a line to be up and running within a week or two.

Perhaps the most important feature of factoring is that it’s dynamically tied to your revenues. This means that the line can increase easily as your sales increase – provided your shippers have high quality credit. This makes freight factoring an ideal solution for small and medium sized freight companies with growth potential whose main problem is that their customers pay slowly.

Although the natural gas and petroleum industry is doing very well, finding business financing for pipeline maintenance companies that serve this industry remains very challenging. Many are small or medium sized family owned companies that can have a difficult time qualifying for conventional bank financing because of their size. However, finding a source of financing is critical for growth, because pipeline maintenance companies are very cash intensive.

Most pipeline installation and maintenance companies run into cash flow problems because their customers pay their invoices in 30 to 60 days. However the pipeline maintenance company needs to pay a number of expenses much sooner than that – payroll needs to be met, rent needs to be paid monthly and suppliers need to be paid quickly. This creates a gap in the timing between revenues and expenses. And this gap can get many companies into trouble since they need to use their own cash reserves to cover expenses while waiting to get paid by clients. Ultimately, the company runs the risk of exhausting their cash reserves. At the very least, this will limit growth. If left unchecked, it could send the company into a financial tail spin.

There are three ways to handle and shorten the timing gap between revenues and expenses. You can accelerate your revenues by asking your customers to pay their invoices quickly. You will need to give your customers an incentive if you want them to pay sooner – a common incentive is to give them a 2% discount for if they pay an invoice within 10 days. A second approach is delay your expenses by paying your suppliers in 30 to 60 days. This may work for larger pipeline maintenance companies with good credit, but may not work for smaller companies. Most companies usually try to improve their cash flow by using a combination of these two strategies. While these two strategies can work, they ultimately leave you at the mercy of your clients and suppliers, who could change their minds at any time.

A third approach is to accelerate your revenues using invoice factoring. This strategy accelerates your revenues by using an financial intermediary, called a factoring company, between your company and your customers. The factoring company purchases your invoices for completed work (at a discount) and pays you upfront. This accelerates your cash flow and puts you in a better position to manage and grow your company. The factoring company then waits until your customer pays the invoice, at which time the transaction is settled.

One major advantage of factoring is that it’s easier to obtain than conventional business loans. Factoring companies consider your invoices to be your most important collateral and can finance them, provided they come from reputable and credit worthy customers. Because of this, factoring is accessible to small and medium sized companies that would not traditionally qualify for bank financing. Factoring can be a valuable tool for companies whose biggest challenge is that they need their customers to pay sooner.

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.

Out of challenge comes opportunity. The real estate bust has forced a number of banks , trusts and real estate companies to foreclose on properties. Basically, they were transformed from being mortgage holders into being property owners, at least until they could sell the properties in the open market. This created a serious challenge for banks since they do not have the staff or expertise to maintain these properties. And with this, a new opportunity was born for property preservation companies.

Any home owner knows that houses and apartments need a lot of care. It’s seems that almost every week the yard needs work or something needs to be fixed, patched or painted. To make matters more complicated, few foreclosed homes are returned in good condition. Far from it. Most are full of debris, in poor shape and in need of substantial repair work. This is where property preservation companies come in. They are the first ones to come into the foreclose property and restore it into good shape, making the property livable again. Then, once the property is restored, they work maintain it to ensure that it remains in good shape.

By their very nature, property preservation companies are labor intensive. They need a staff of people who are proficient at fixing things. They also constant need of supplies in order fix homes. Their biggest problem is that most banking customers pay their invoices in 30 to 60 days, which creates a cash flow problem. The property preservation company needs to cover all its expenses while waiting to be paid. This can be very challenging since few companies are well capitalized and can’t afford to wait. Furthermore, it’s hard to grow a company if you have to keep a large reserve of cash just to cover current expenses.

One way to solve this problem is to use business financing. However, few companies can qualify for conventional business loans, especially since banks and other financial institutions still have some reluctance to lend. One alternative that has been gaining popularity is called invoice factoring. This solution reduces the time it takes your company to receive payment down to 2 days. Factoring invoices provides your company with predictable cash flow and eliminates the guesswork of when you invoice will be paid.

The most common way to set up a factoring transaction is to have the factoring company act as an intermediary between your company and your customer. Your company sells the invoice to the factoring company, who pays for it immediately. The transaction concludes once your customer pays the invoice in full. At that time, the factoring company settles the transaction.

Most factoring companies purchase invoices in two installments. The first installment is called the advance and is given to you at time of purchase. Most advances are for 80% of the gross value of the invoice. The second installment is called the rebate and is provided to your company once the customer actually pays for the invoice. The rebate will be for the remaining 20%, less any financing fees.

The most important requirement to qualify for invoice factoring is to have credit worthy commercial customers. This is because their invoices are the collateral that the factoring company is purchasing. Property preservation companies have a nice advantage here since most banks are still reliable payers. Additionally, your company needs to be free of liens , judgments and legal problems.

Now that the recession is over and the economy is growing again, transportation companies are finally seeing some growth themselves. However, conditions are more difficult than they were before and most shippers are paying their freight bills slowly. Invoices that used to pay in 15 to 30 days are taking 45 to 60 days to pay. This creates a cash flow problems because few carriers have the resources to pay their operating expenses while waiting 45 to 60 days to get paid. If managed incorrectly, this situation can lead to three possible outcomes: the carrier stops growing, the carrier gets into trouble with operational costs, or in the worst case scenario, the carrier goes out of business.

If you don’t want to get business financing, your only two options are to either restrict growth or to convince shippers to pay sooner. Actually, it’s not unusual for some shippers to offer a quick payment option if you give them an incentive discount, such as 2% off if they pay in 10 days or less. This strategy can work well but it will leave you at the mercy of your shippers. Your company could run into problems again if they decide to stop taking the early payment discount.

Another alternative is to address the cash flow problem directly using freight bill factoring. This financial product provides the equivalent of a quick pay by using an intermediary company called a factoring company, which provides a quick payment for your freight bill and holds it until your shipper pays. Using freight factoring can improve your cash flow substantially by reducing the amount of time you wait to get paid for your freight bills.

Most freight factoring transactions are done in two installments. Your first installment of 90% of the invoice is provided to you as soon as you send the invoice to the factoring company. The remaining 10%, less a service fee, is paid as a second installment once the invoice is paid in full.

One feature that makes factoring an attractive option is that it’s easier to obtain than most conventional business financing products. The most important requirement is that your shippers must have a good commercial credit rating, since factoring companies advance funds based on your shippers ability to pay. Since solid invoices from good shippers are the factoring company’s preferred collateral, small and growing companies that have good clients can usually qualify for this solution.

Freight factoring can be an ideal solution for transportation carriers whose main issue is that they can’t afford to wait for their clients to pay because they need the funds sooner.

The transportation industry was very affected by the recession that finished in 2009. Although the recession has formally ended, the credit crunch that started with the recession is still ongoing and will remain so for the foreseeable future. Although some banks are lending more, for the most part, getting business financing remains very difficult. This is especially true for transportation companies and not likely to change in the near future because a number of lending institutions are still in trouble themselves.

To qualify for bank or institutional financing the carrier needs to show a few years worth of profitable operations, strong growth, strong assets and have a good management structure in place. Unfortunately, few of the carriers and brokers that weathered the recession will be able to meet all these criteria. Fortunately, conventional business loans are not the only financing option for this industry. And in many cases, it may not be the best option either.

Most freight carriers and brokers experience cash flow problems because they cannot afford to wait 30 to 60 days for customers to pay their freight bills. Most transportation companies have heavy ongoing expenses – there are drivers to be paid, trucks that need repair and a number of other expenses. It’s not unusual for undercapitalized carriers to run into cash flow problems because they can’t afford to wait for their freight bills to be paid. One way to fix this problem is to implement a freight bill factoring program.

Freight factoring solves this cash flow problem by providing you with an advance for your freight bills. Instead of waiting 30 to 60 days to get paid by the shipper, you can get up to 90% immediately from the factoring company. This provides you with the cash you need to pay your drivers and cover your business expenses. Once your shipper pays the bill in full, the factoring company rebates the remaining 10%, less a small financing fee.

One of the advantages of freight factoring is that is fairly easy to obtain and it does not have the burdensome qualification requirements of conventional business financing programs. The most important variable for qualifying is having customers with good commercial credit. This is your most important collateral from a factoring standpoint. Additionally, the business and its owners need to be free of legal and tax problems. This makes freight bill factoring an accessible solution for new and established freight companies that are looking to grow.

Most new and growing transportation companies have one thing in common – cash flow problems. Unless they have a quick pay set up with their clients, most freight shippers and carriers can expect their bills to be paid in 30 to 45 days. This can be a problem for many because they have to bear the costs of delivering the freight and then carry all the company expenses while waiting to get paid. The company needs to have a substantial cash cushion to be able to absorb all the costs – or risk delaying important payments.

One way to solve this problem is to cover the time gap with business financing. The challenge with conventional business financing is that it’s very difficult to obtain, especially in today’s environment. Most lending institutions will scrutinize every detail of the company before making a business loan. This means that to qualify, your business will need to have at least two years of positive financial statements, strong assets and owners with a solid background. Startups and small freight companies will have a tough time meeting these requirements.

There is an alternative solution to this problem though. You could factor your freight bills. This eliminates the anxiety of waiting for your customers to pay. It can provide predictable cash flow ensuring you have funds to pay for drivers, fuel and repairs. And as opposed to most conventional financing, freight bill factoring is relatively easy to obtain.

Freight factoring offers a fairly simple proposition. A factoring company provides you with an advance for your freight bills. They hold them as collateral while waiting for the customer to pay. Once the freight bill is paid, the transaction is settled. Usually, factoring companies advance about 90% of the freight bill once the load is delivered. You get immediate funds. The remaining 10%, less the factoring fee, once the customers pays the bill in full.

The transaction flow usually works as follows:

1. You send the freight bills and documentation to the factoring company
2. The factoring company advances 90% of the invoice and deposits it in your account
3. The factoring company verifies the invoices mails the freight bills to your client for payment
4. Your client pays the invoice in full. You receive the settlement of 10% less the factoring fee

There are two key areas where factoring differs from other types of financing. First, the factoring company verifies the invoices to ensure they are accurate (step #3). This is a critical step since the invoice is the collateral for the transaction and it must be verified before funding. Second, the client usually sends the payment for the freight bill to the factoring company, on behalf of the client, rather than to the client directly (step 4). This enables the factoring company to then settle the transaction and close it. Freight factoring is relatively common in the transportation industry and most shippers understand the need for factoring and are comfortable working with these procedures.

Another important difference between factoring and conventional financing is how collateral is evaluated. In a factoring transaction, the freight bill is the collateral in the transaction. Factoring companies will look at the credit of your customers very closely to determine eligibility and invoice quality. Only those bills coming from credit worthy customers can be financed. The advantage of this, is that a transportation company can use their customers credit to their own advantage. A small freight carrier or broker with a solid roster of customers that may not be able to get a business loan but will usually have a good chance of obtaining 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 startup 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. 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 startups. 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.

Most machine shops tend to be very cash flow intensive companies. They have to handle purchase orders, pay suppliers, handle payroll and collect from clients. All these events have to happen with the right timing for the business to be successful. And usually, timing is very tight. And unless the company is well funded, this means that the company is very sensitive to late client payments. For example, a client delay in a payment can trigger a chain reaction of events that leads to missing supplier payments or delaying payroll.

This problem can easily be solved with business financing. Unfortunately, getting financing in the current economic environment is very difficult. Few institutions are willing to provide business loans or lines of credit to companies that can’t provide sufficient and substantial secondary collateral. Aside from having substantial assets, companies need to show impeccable financial statements, a strong management team and a solid business plan. Few small or midsized machine shops can meet these requirements – putting a business loan out of the reach of most.

A second alternative is to ensure that client payments are always on time, or ahead of schedule. While coaxing clients to pay quickly can be difficult, you can accomplish a similar result by financing your invoices with using factoring financing. Invoice factoring provides you an advance on your invoices, providing the funding you need to meet expenses and complete projects. The transaction is settled once your client actually pays the invoice.

Since factoring provides a predictable and accelerated payment stream, your company is usually in a better position to take on new clients and projects. When used correctly, accounts receivable factoring can help a company grow.

In general, factoring is much easier to obtain than a business loan. To qualify for it, your clients must be credit worthy companies, and your business must be free of liens and encumbrances. Thanks to the current difficulties in getting conventional funding, invoice factoring has been gaining traction in becoming a mainstream source of funding.

The field of Information technology (IT) is full of small and medium sized companies that are vying for customers and for position. Surviving in this cutthroat industry requires that owners manage their businesses, especially their cash flow, very carefully.

The IT industry is known for having heavy expenses. Payrolls tend to be high since technical employees command high wages. Also, if the company also resells hardware, if not unusual for equipment and inventory expenses to grow quickly, especially if the firm is involved in large projects.

On the revenue side, clients usually pay their invoices in 30 to 60 days. Because of this, the firm must usually cover its overhead and other expenses for a time before being able to recoup their investment. Waiting to be paid can be a challenge for many small or medium sized IT firms. Furthermore, few small firms have enough capital to handle payment delays. That means that the firm could be at risk of missing supplier or employee payments, if a few clients delay their invoice payments.

If the company has funds in the bank, a few late invoices will not affect things at all. However, if the firm is running lean, there are only three things you can do. You can delay your supplier payments until you get paid, you can try and arrange for quicker payment or you can get business financing.

Negotiating payment schedules with clients and suppliers can be tricky and seldom produces predictable results. Most small and medium sized firms will probably be better of getting formal financing. One emerging financing solution called factoring is ideal for this type of situation. Invoice factoring eliminates having to wait for your clients to pay by providing you with a funding advance on your invoices. You get stable and predictable cash flow, which enables you to focus on running your company, rather than on collecting invoices. The transaction is settled with the factoring company once your client pays the invoice.

Invoice factoring is relatively easy to qualify for and available to small and medium sized businesses. The biggest requirements to qualify are that your clients must have good commercial credit scores and your business must be free of encumbrances.

Factoring can be a great solution for small and midsized IT companies that can’t afford to wait 30 to 60 days to get paid by their clients.

The pallet manufacturing and distribution industry is very competitive. Whether you are manufacturing pallets, distributing them or both – managing income and expenses can be very challenging. You have to work with suppliers that demand quick or immediate payments. At the same time, your clients want to pay invoices in 30 to 60 days. Pallet manufacturing and distribution companies that cannot manage their income and expenses soon find themselves with cash flow problems.

Problems usually start when a client starts taking a little longer to pay their invoices, forcing you to dip into capital or to delay payments to your owns suppliers. If left unchecked, this situation can snowball into a major problem that threatens your company.

There are a few ways to manage this problem. One alternative is to try and negotiate delayed payments to your suppliers while trying to obtain quicker payments from your clients. Although worth a try, this type of juggling seldom works for the long term. A second alternative is to get business financing from an institution.

This can be a good alternative for larger companies who can show substantial assets and provide solid financial statements. Although qualifying for a business loan is not easy – business loans are usually available to well managed larger firms. But what can small or midsized firms do?

A better alternative may be to use factoring financing. Invoice factoring solves the dilemma of slow paying clients by providing an advance against their invoices. This quick payment provides the firm with the funds they need to meet expenses and grow the business.

Factoring has a number of benefits. It provides the company with stable and predictable cash flow, which smooths operations and planning. Furthermore, accounts receivable factoring (as it’s commonly called) is fairly easy to obtain. The biggest requirement is that the invoices you finance have to be from credit worthy commercial clients. Additionally, your company needs to be free from legal or tax problems or encumbrances.

Qualifying for factoring is relatively easy which makes it an ideal solution for small and medium sized clients whose biggest problem is that they cannot afford to wait to get paid by clients.

Most commercial cleaning and janitorial companies are small businesses – started by entrepreneurs who had an idea and plenty of motivation. Few, however, have plenty of capital. But that is understandable because janitorial companies tend to be easy to start – buy some supplies, hire some people and you are ready to go.

But there is a big catch to this business model – commercial clients don’t pay for janitorial services upfront. Rather, they pay on a net 30 to net 60 days. This means that you only get paid a month or two after completing the work. In the meantime, you still need to buy more supplies and pay your employees.

If your company is well capitalized, waiting to get paid is not usually a problem. On the other hand, if your company is not well capitalized, waiting can be a very serious problem. The simple solution to this challenge is to get business financing. This is almost always a problem for the company since few janitorial companies have substantial assets to use as collateral – and institutions need collateral to issue business loans. More often than not, the business owner will need to put their house (or other assets) as collateral to secure the business loan. However, business loans are not the only alternative.

One solution is to use invoice factoring. This financial tool provides you with a quick payment for your invoices, boosting your cash flow and enabling you to meet your expenses. To qualify for factoring you need to have invoices from credit worthy clients. This makes it an ideal solution for janitorial companies that handle commercial work for large clients.

Most factoring transactions are structured in two payments. You get the first payment, usually 80% of the invoice, as soon as the work is done and you invoice your client. You get the second payment, the remaining 20% less the financing fee, as soon as your client pays the invoice in full.

One advantage of factoring is that it enables you to leverage your client’s credit to your advantage. Furthermore, it’s a dynamic product that is tied to your sales. This means that your financing line increases as your sales to credit worthy clients increase. This makes it ideal for small janitorial companies who are experiencing growth.

Finding business financing for any small or medium sized company in the construction industry has always been a challenge. As an industry, construction has always been difficult to finance. This is in part because each contract carries a lot of risk since many things can go wrong. Also, each contract has many players – the project owner; the general contractor; the subcontractors ; the financing institutions; which increases financing complexity.

Although demolition companies are considered to be in the construction trade, they are not always as affected by their issues and can be easier to finance. Demolition work tends to be done at the start of the project and is not subject to the usual overruns of other subcontractors.

Most demolition companies tend to get paid 30 to 60 days after invoicing. This is a common business practice but it can create serious cash flow problems. Few companies can wait that long to get paid and still cover their own payroll, rent and business expenses. Unless the company has substantial cash reserves, it will run into problems.

Most company managers will try to cover the cash flow gap with a business loan. However, few companies can qualify for business loans in this environment. Institutions will only provide business loans to companies that are well collateralized, have strong management and have impeccable financial statements. Few demolition companies will meet this criteria.

There is an alternative that is available to most construction subcontractors. It’s called construction factoring. Construction factoring solves the cash flow problem by advancing funds against construction invoices. Instead of waiting 30 to 60 days to get paid, you get an advance from the factoring company. The transaction is settled once the GC or commercial client pays.

One major difference between factoring and a business loan is that the factoring company considers your invoice to be strong collateral, provided it’s from a good commercial client or GC. Factoring is dynamically tied to your sales, and grows as your company does.

Factoring can provide predictable cash flow to companies who cannot afford to wait up to 60 days to get paid by clients.

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.

Trying to get business financing for a construction subcontracting business is extremely challenging and will remain very difficult for the foreseeable future. Most experts predict that it will take years for the industry to regain a stable footing in the economy. And until that happens, most institutions will be very reluctant to provide business loans to subcontractors.

Although the situation may look dire for some, there are many construction subcontractors that are doing very well in this environment. And they span the industry from cell tower construction, to demolition, to carpenters, to HVAC companies. These companies are doing well but cannot get the business financing they need simply because they are in an industry that is currently considered risky by lenders.

Most subcontractors look for business financing because they have cash flow problems that originate because they get paid in 30 to 60 days after invoicing. Basically they deliver the work, send an invoice and wait to get paid. Unfortunately, few have the capital to wait. They needs fund to pay employees, office expenses and suppliers.

One alternative to solve this problem is to use construction factoring. Construction factoring provides an advance on slow paying invoices, providing the cash flow a company needs to meet expenses while waiting for their invoices to get paid. The transaction is fairly simple, a factoring company advances you a portion of your invoice – about 75% as a first payment. Once your client actually pays the invoice, the transaction is settled and you get the reminder second payment of 25% (less the factoring fee).

One advantage of construction factoring over a conventional business loan is its flexibility. The factoring line is not fixed but rather is based on your invoices. It grows with your sales. Furthermore, most factoring companies look at the credit of your GC (or commercial customer) as one of their more important funding criteria. This makes construction subcontractor factoring an ideal solution for small and medium sized companies whose biggest assets are solid clients.

Factoring financing is an effective solution for companies whose biggest challenge is that they can’t wait 30 to 60 days to get paid by clients.

The current economic environment has been particularly tough for trucking companies and freight brokers. Winning client accounts is harder than ever. Likewise, keeping clients requires work very hard to meet their ever changing demands. To complicate matters, few clients pay their invoices quickly. Most commercial clients take anywhere from 30 to 60 days to pay their freight bills. This puts a considerable stress on your cash flow since you still need to pay for drivers, fuel and repairs. Few companies can actually afford to wait and tend to run into working capital problems.

There are two common ways to deal with this cash flow problem. The simple solution is to ask clients for a quick pay. Unfortunately, the simple solution is not easy at all. Clients have the upper hand and will usually demand to 30 day terms or threaten to take their business elsewhere. The second solution involves using business financing to close the gap in the cash flow. The problem with this strategy is that business loans are not easy to obtain in this environment. Most institutions will only make a business loan to a company that has a solid multi-year growth record, outstanding financials, substantial assets and a well seasoned management team. Few transportation companies can meet all these criteria.

There is a better way to solve the problem by using a solution that provides the equivalent of a quick payment. It’s called freight bill factoring. It works by using a financial intermediary called a factoring company, who advances funds against your freight bills. They settle the transaction once your client actually pays the bill. One advantage of factoring is that it provides the equivalent of a quick payment, without requiring your clients to pay faster. This makes it easy to integrate in most organizations.

Freight factoring is easier to get than other forms of financing. To qualify for this type of financing, your business must have solid commercial clients, be free of lawsuits and encumbrances and have good growth and stability potential.

Although conditions are improving as we are emerging from one of the worst recessions in history, getting business financing remains very hard. This is difficult for small companies because they are having the hardest time getting financing even though they need it the most. Outsourced labor companies such as security guard companies and staffing agencies are noticing a significant improvement in their sales but can’t follow through because they are not well financed.

To make things harder, commercial customers that used to pay their invoices in 30 days are now taking 45 days or longer to pay. This creates a serious cash flow problem, since security guard companies need to cover payroll on a weekly basis. Few companies can afford to wait that long to get paid.

One way to solve this cash flow problem is to shorten the time between delivery of services and receipt of payment. Since asking clients to pay sooner seldom works, the alternative is to use invoice factoring.

Invoice factoring provides an advance on slow paying invoices. The mechanics are simple. You sell the invoice to a factoring company, who pays you for it upfront. This provides you with the funds you need to meet your companies expenses. The transaction is settled once your client pays the invoice in full. Factoring companies always structure the purchase in two parts. The first part, called the advance, covers 80% to 90% of the invoice and is given to you immediately. The second part, which is the remaining 10% to 20% is provided once your client pays. The factoring fee is usually deducted from the second transaction.

Invoice factoring has been gaining popularity in the past few years. And in many circumstances, invoice factoring can provide a better solution than a business loan. Furthermore, factoring is easier to get than most business loans.

A major advantage of accounts receivable factoring is that factoring companies look at the credit quality of your invoices as one of the most important parameters in their funding decisions. This means that small but well run companies whose only asset are invoices from good clients can usually qualify.

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.

The last decade has been a boom for security agencies. As the security consciousness of the nation has increased, so has the demand for companies that provide security personnel. Private security guards are now guarding airports, large companies, infrastructure concerns and many public places. In summary, these have been financially rewarding times for companies in this business.

At the same time, managing growth has been very challenging for the company owners. Security guard agencies have heavy payroll responsibilities. They must be able to pay their guards on time, every time. The problem is that most of their commercial clients pay their invoices in net 30 to net 60 days. The problem is simple, owners have to meet weekly (or bi-weekly) payroll, but clients pay in 30 to 60 days. So, unless the company has a substantial cash reserve to handle payroll in the interim, it will run into problems. The solution is to get business financing.

For small businesses, getting business financing is easier said than done. Getting a business loan is very difficult in this environment. And anyways, business loans are not necessarily the solution to this problem. Why? Generally, business loans are best suited for buying assets and then paying them down over a number of years. A better solution, and one that eliminates the payment timing problem, is to get and advance against your invoices. This provides the funds you need to cover payroll and operate your business.

How do you get an advance on your invoices? There is a product called invoice factoring that does just that. It provides advances in your slow paying invoices. The proposition is simple. The factoring company advances you funds against your invoices and then gets paid once your client pays the invoice. What separates factoring companies from other solutions is that they provide funding against the business credit of your client. This means that a small company (or a startup) can usually get funded based on the strength of their client. Although the credit worthiness of your client is the most important requirement, it’s not the only one. To qualify for factoring, your company must have not liens, judgments and have owners with a good track record.

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.