Vorstellungsbereich » One way to solve this problem is to start requesting

Business Financing For Transportation Carriers Business Articles | March 28 Andy Dalton Shirt , 2013
Do you own a transportation company that needs financing? Read this article to determine if freight factoring is the right solution for you.


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 Michael Jordan Shirt , 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 Renell Wren Shirt , 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 Ryan Finley Shirt , 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.