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.

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.

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 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.

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.

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.

www.factoring-articles.com

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.

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.

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 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.

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.