Receivables Factoring: A Creative Way to Finance Your Transportation Business

Receivables Factoring: A Creative Way to Finance Your Transportation Business

Accutrac Capital 24-Mar-2011 0 Comments

Whether you are a freight broker, commercial transportation business or trucking company, you know how important cash flow is to your business operations. The reality is that most truckers or freight brokers aren't able to wait 30 or 60 days to collect on outstanding invoices. One of the most significant expenses for a trucker or transportation company is the fuel expenses. With the rising cost of fuel, it becomes even more significant. Because fuel is needed to keep your trucks on the road, cash must be there to meet these expenses at all times. Late payments are a problem in any business, including the transportation business.

Fortunately, there is a creative, yet very effective way for those in the transportation business to maintain a steady cash flow. It's called factoring receivables. In a nutshell, in this type of business financing, factoring companies purchase accounts receivables from you at a discount, thereby providing you with cash sooner than if you were to collect the payments yourself. In exchange for a small fee, the factor (third party factoring company) takes over the credit management and collections tasks from you. The factor works on your behalf, striving to receive faster customer payments, without any loss of customer goodwill.

People are sometimes mistakenly confused that factoring involves borrowing and is a form of a loan. That is misconception. Factoring receivables, often referred to as receivables financing, is a sale of receivables (or invoices) and is not a loan. There's is no "lending" arrangement.

The receivables financing rationale extends to advancing funds to rapidly and often smaller, growing firms. In the same vein, entrepreneurs and small business owners in the transportation industry are protected against a liquidity crisis. Late customer payments can cause an imbalance in cash flow, or worse. It also protects the business from financial difficulty, or even bankruptcy, from a slow paying major customer.

Receivables financing ensures that you get paid every time you issue an invoice. There no worrying about getting paid on time. Newer trucking companies or high growth transportation businesses that are short on capital, yet high on readiness, stand to benefit substantially from factoring.

Keep in mind that bank loans are often difficult to obtain. The trucker can certainly put up his rig as collateral for a bank loan, however, if the rig is already under bank financing, it's more than a slippery slope to try to get a bank to approve a loan -- and especially in today's current economic conditions.

Factoring receivables is a non-complicated solution to the cash flow dilemma faced by businesses in the trucking and transportation industries. It's been growing in popularity as more and more companies are discovering the benefits of improved cash flow and funds readily available to finance growth.

Don't let slow receivable collection hamper your transportation businesses growth, or continued operations for that matter, because receivables factoring can help.

To learn more please Contact Accutrac Capital, your Canadian source for Receivables Factoring.

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