Having sufficient working capital to operate your business on a is critical if your company is to prosper. Without it, you won’t be able to meet current liabilities such as rent, payroll and supplier payments. When faced with cash flow problems, many owners try to ignore the problem by waiting before taking action. The hope that the problem will solve itself. This seldom happens. While a cash flow problem may be solved temporarily by a quick customer payment, chronic cash flow problems seldom fix themselves and need management action.

One of the more common causes for cash flow problems is offering net 30 or net 60 terms to clients. By offering terms you are effectively delaying your invoice payment. However, usually, you are still liable to pay your suppliers and employees quickly. This creates a gap between when you need to pay liabilities and when you will receive income from an invoice.

Many companies can bridge this gap by using their own fund reserves to cover expenses. Those that don’t have their own reserves usually try to get some form of business financing to cover the gap. Frequently, an owner will approach their local banker hoping to get a business loan. While business loans can be used to correct this problem, they are better suited for buying assets rather than covering cash flow problems. For many companies, a better solution is to use invoice factoring.

Invoice factoring, a form of financing offered by a factoring company, provides an immediate advance on invoices that are payable in 15 to 90 days. This provides the cash flow to cover operating expenses, helping ensure that your company can deliver on its promises. Factoring has a number of advantages. The most important one is that the credit quality of your customers plays an important role in the transaction, and for the most part, determines the amount of funding you can get. This feature makes factoring very dynamic as your financing line can grow as your billings grow.

Factoring companies structure the transaction in two payments. The first payment, about 80% of the invoice, is funded as soon as the invoice is presented to the client. The second payment, about 20% (less the fee), is funded once your client actually pays the invoice.

Factoring is a great solution for companies that have great potential but can’t afford to wait to get paid by the clients.

One of the more common business problems involves dealing with slow paying clients. In most business to business transactions, a product or service is sold to a client who pays in 30 to 45 days. Offering this type trade credit is basically the norm, especially if you are selling to large companies. Basically, larger companies get better use of their cash by making their vendors wait to get paid. It’s that simple.

This agreement works well if the vendor, in this case yourself, has the ability to wait 45 days to get paid. Some can. Many can’t self finance, because they have obligations they have to meet. There is payroll. There are suppliers. There is rent and many other expenses that must be met.

This problem can be solved easily with business financing. However, everyone knows that business credit is tight and very hard to get. Most institutions are making conservative decisions. They need to see assets, solid financial statements and a good track record of running you business. This put business loans out of the reach of most business owners. But a business loan is not the only way to solve this particular problem, nor is it always the best solution.

A better solution may be to factor your invoices. Invoice factoring is a type of transaction whereby a factoring company gives you an advance for your 30 to 60 day invoices. This provides you with the funds to meet payroll and other critical expenses. The transaction is then settled once your client actually pays for the invoice.

One of the advantages of factoring is that it’s easy to obtain, when compared to other products. Factoring companies secure their position by holding the invoice as collateral and they consider this your most important collateral. This an important feature because it provides financing to companies whose biggest – or only – asset is a solid client base. One additional benefit of invoice factoring is that the credit limit is dynamic and tied to your invoices. If you increase your billings to reputable clients your factoring line will usually be increased to match it.

Although invoice factoring is certainly not a cure all, it works very well in instances where the major business challenge is the inability to wait to get paid by clients.

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.

Running a business in Canada has always had its particular set of challenges. One of the biggest challenges has always been finding the right business financing. The market has been dominated by banks and institutions, which have very tough and strict lending criteria. Obtaining a business loan or almost any other type of business financing in Canada in pretty difficult. However, that is changing. Quickly.

Recently, Canada has seen an increase in the number of independent financing companies that specialize in business financing. Some offer business loans, but the majority have focused on offering invoice discounting (also know as invoice factoring). Although a relatively young industry, the Canadian factoring industry is growing quickly. But, what is invoice discounting?

One of the biggest problems for small and mid sized businesses is waiting up to 60 days to get invoices paid by their commercial clients. This can affect their ability to pay rent, suppliers or salaries on time. This problem is common for many businesses, such as trucking companies, staffing agencies, manufacturers, consultants and others. Invoice discounting is a financial product that eliminates slow paying invoices by financing them.

The factoring process is very simple. Once you invoice an approved client, you send a copy of the invoice to the financing company (also known as the factoring company). The factoring company advances you a significant portion of the invoice while they wait to get paid by your customer. The transaction is settled once the customer pays the invoice. The factoring company offers this service for a small fee or discount.

An invoice discounting arrangement provides you with the necessary funding to pay expenses such as rent, suppliers and employee salaries. This enables you to operate your business efficiently, without worrying about when your clients will pay. Furthermore, invoice discounting can help you win bigger clients, because it eliminates the worries of having to wait for them to pay.

As opposed to bank financing, invoice factoring is relatively easy to obtain. The biggest requirement is that you do business with established clients who pay their invoices regularly. Invoice discounting is truly a flexible product that is within easy reach of small and mid sized businesses.

There was a time when obtaining business financing in Canada was very hard. But this is changing as small business financing companies are moving into an area previously dominated by large banking institutions.

As most business owners know, qualifying for a business loan or a line of credit is very hard. Bank lending criteria is so strict that few companies ever manage to get any financing. But that is changing.

If you own a company that sells goods or services to other businesses (or the government), then there are two financing options that are available to you. They are invoice factoring and purchase order financing.

Are your clients taking up to 60 days to pay their invoices? Consider invoice factoring.

Selling to mid size and large companies is great, as they can provide you with reliable and steady business. However, their payment terms are always challenging. They usually demand the right to pay in up to 60 days. In the meantime, you must cover paying rent, salaries and suppliers. This can easily be fixed by factoring financing. Factoring can eliminate the 60-day wait and get your invoice paid in 2 days. The process is simple, you sell your invoices to a factoring company, who pays you up front for them (less a small fee). You get your money up front, while the factoring company waits to get paid.

Need money to pay your suppliers? Consider purchase order financing.

If you sell products as a reseller or wholesaler, then your biggest challenge is getting the financing to pay your suppliers. In this case, purchase order financing may be the right solution for you. Purchase order funding provides you with the necessary funds to cover your supplier expenses, allowing you to fulfill the order and deliver to your clients. The transaction is then settled when your client pays their invoice and the collateral is the purchase order from your client.

Conclusion
Both factoring and purchase order funding are easy to obtain and can be set up in days. The biggest requirement is that you own a profitable company and that you do business with reputable clients.

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.