3 Business Reasons for Using Factoring for Your Trucking Business

3 Business Reasons for Using Factoring for Your Trucking Business

Accutrac Capital 11-Jul-2013 0 Comments

Why do owners of trucking and transportation companies include invoice factoring (also known as invoice discounting) as part of their financing toolkit? The business rationale for choosing factoring has a lot to do with what stage your transportation business is in at the moment, the mix of clientele you have and your own financial goals for your company. All of these aspects affect your cash flow, often to a point where it negatively impacts your ability to operate at peak capacity. Reputable accounts receivable factoring companies that specialize in freight transportation provide tailored funding options to help your trucking business grow.

Invoice Factoring solves a wide number of cash flow challenges such as:

The challenge of finding cash to meet operating expenses

Even the most successful trucking companies go through periods where their outgoing cash requirements exceed cash-on-hand. That’s especially true for transportation companies that offer extended credit terms to their customers for large lucrative contracts. When you have to invest the manpower and resources upfront to deliver your services, it’s often tough to wait 30-60 days for an invoice to be paid. In the interim, you still need to make payroll, pay for fuel and maintenance, and the dozen other day-to-day expenses needed to keep your trucks rolling.

Factoring your freight bills provides immediate cash to pay operating expenses. And, if you utilize Accutrac’s unique factoring line of credit, you can draw on funds only when you need them (and pay factoring fees only on funds drawn).

The challenge of managing a wide variety of credit terms

One of the key strategies for keeping your cash flow healthy is tightly managing your invoicing and accounts receivable. If you could convince every client to pay you within 15 days, without exception, that task would be simplified. However, any trucking business owner will tell you that that simply isn’t the way it works. In fact, the larger your trucking company becomes, the more likely you’ll deal with large lucrative customers who demand extended payment terms. And, often those payment terms will differ from customer to customer. What results is a roller coaster ride of cash flow that can be difficult to predict and track even if all customers pay you within their agreed upon term. The water becomes even muddier when you add to the mix those customers who pay late.

Factoring your trucking invoices evens out cash flow, making it predictable and immediate. You issue your invoices and receive cash within 24 hours. The factoring company then manages your receivables and waits to be paid by your customer. Not only does factoring create immediate cash, it also reduces the administrative time, headaches and costs of chasing after receivables.

The challenge of managing through growth and transition

Any trucking business owner who’s experienced rapid growth or gone through a significant business transition will tell you…rapid growth and transition eat cash flow for breakfast. Unfortunately, these exciting and often turbulent times for your business are when traditional financiers, like banks, smell risk and retreat like turtles into their shells.

Factoring companies, however, take a completely different view of high growth companies and trucking businesses in transition. As long as you deal with creditworthy customers, you can qualify for factoring for the cash needed to finance your trucking company’s growth, or to see it through its time of transition.

For more information about factoring your freight bills and trucking invoices, visit www.accutraccapital.com.

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