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Factoring When You Need to Keep Your Trucks On The Road

Accutrac Capital 01-Mar-2013 0 Comments Permalink

You've just landed a large ongoing trucking contract with a great customer. The problem? Many US companies want a 30-45-day payment term. How do you manage the cash flow demands of paying for fuel, driver's wages, permits and the dozen other expenses you incur to keep your trucks rolling while waiting to be paid?

Know where you stand with cash flow

The first step is to map out where your trucking company stands with cash flow. Especially when you take on a new, large customer, this is something you want to plan upfrontÉbefore cash flow problems put the brakes on your ability to operate your trucking business efficiently.

In the same way that you'd budget for monthly expenses, budget your monthly cash flow. That will alert you to times of cash shortages and surpluses. Have a back-pocket plan for where you'll find the cash in those cash flow lows. That can include a business line of credit, or setting aside a portion of your surpluses in reserve. If neither of those are options, consider factoring your trucking company's accounts receivable invoices to generate a steady supply of cash flow.

Factoring your accounts receivable invoices to create cash flow

American trucking companies often find that they can't meet the strict requirements of traditional lenders like banks. Factoring is an alternative form of financing that trucking companies can qualify for even when a traditional business loan or line of credit isn't possible. Why the difference?

  • Unlike traditional financing, qualifying for factoring isn't based on your credit score, your trucking business's financial history or assets.
  • Qualifying for factoring is based on the creditworthiness of your customers.

How factoring works for your trucking company

Simply, factoring is selling your accounts receivable invoices to a factoring company at a discount in exchange for immediate cash. Here's how factoring works:

  • Once you're set up with a factoring agreement, you send your invoices to the factoring company who invoices your customer.
  • You receive up to 90% of your invoice amount, usually within 24 hours of issuing the invoice.
  • Your customer pays the factoring company directlyÉwho then reimburses you the balance, minus the factoring fee.

You get 24/7 online access to check on the status of your account and manage itÉwhen it's convenient for you.

A great side benefit is that the factoring company takes care of the often tedious back office work of managing invoices and chasing after receivables. That's especially helpful to smaller owner-operator truckers who spend a lot of time on the road and struggle with keeping up with unpaid invoices.

For more information about factoring to improve your trucking company's cash flow, visit www.accutraccapital.com.

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