Selecting The Right Factoring Partner for Your Trucking Company

Freight bill factoring, or invoice factoring, is not an uncommon practice in the trucking industry. The condensed version of the operation is that a trucking business (typically a small to midsized owner or someone new to the business or looking to expand) sells their invoices on delivered goods to a factoring company who issues a cash advance within 1 or 2 days of receiving the invoice for a percentage of the invoice amount. The popularity of freight bill factoring, particularly among small owner operator trucking companies, is the cash influx which allows you to keep your business thriving instead of sweating out the next month or two until collection on invoices gives you the cash flow you need.

Just like any credit service or lending agency, not all invoice factoring companies operate under the same umbrella of fairness and ethical practices. In many ways, a factoring company can become a vital partner in your financial well being, and selecting a trustworthy companion means considered a few key factors.

First what are your contractual time constraints and what penalties exist for opting out early. Also consider, the tough situation of securing a new factoring partner. Many companies require a 60 day notice of cancellation, and payment in full of all outstanding invoices before terminating a relationship. This type of set up can create a cash crisis that unfair factoring companies can use to force dependency on their services.

Depending on the scope of your current operation, you might look for a factoring company who caters to new, expanding or smaller trucking companies. Obviously these are the types of trucking companies who have the greatest need for factoring and are less likely to qualify for more traditional business loans, but more stringent factoring companies often set minimum monthly requirements and require a complicated and lengthy application process.

Lastly, look for a factoring company who is upfront about fees and factoring costs (i.e. chargeback, start-up, sliding percentage scale for lending). Also make sure you understand whether you are entering into a recourse or non-recourse factoring agreement which determines who is responsible for nonpayment of invoices.

As with any decision you make about the financial well being of your company, do your homework. Factoring is a useful practice in many thriving trucking operations, and has been the means of many a success story. Just make sure you look before you leap.

Economy and Invoice Factoring

In recent years many businesses have been at the very peak of their success and would never have dreamed that their business would not be recession proof.  Even industries like the medical fields have been affected by these difficult times. It has been said there will always be a need for three things, food, medical, and law enforcement. These industries may not have been hit as hard as others like construction and travel. But, all of these industries have been hit very hard by these financially challenging times. It makes sense, when times are tough people do not vacation, cut down on groceries, and put off any medical procedures they can.

There are many companies out there that have felt secure in their business as they have been able to maintain their customers and are still doing OK. And then we hear of companies who have felt secure but are now faced with possible doom due to the huge finance companies that are being forced into bankruptcy. Many of these people never considered what impact this financial market could have on their business. CIT is a great example of this, who would have thought their small business would be in jeopardy because of some mega financial company like CIT going under? Well, there are many many businesses now faced with this exact problem.

We have heard that “only the strong survive”, this has validity when it comes to financially difficult times. But, there is a way for those who are feeling weak to find the strength to overcome these hardships, through invoice factoring. Invoice factoring is designed to help struggling companies get through tough times by providing them a cash flow by buying out their invoices. Naturally these invoice factoring companies charge a fee or percentage based on their risk and/or your ability to pay but it may be the only way for some businesses to create a cash flow to get them through this economic mess we are in.

Invoice factoring companies can provide many different flexible financing solutions, including accounts receivable factoring, invoice factoring, credit card factoring, asset based loans, purchase order financing, working capital credit lines, inventory financing, commercial equipment finance and leasing, and business working capital.

Import / Export Factoring

If you are in the import and/or export factoring you may not have considered the fact that you could use a factoring service to help you with business cash flow.  Many businesses that do international trade question:

When working with my customers in a foreign country, how do I know I will get paid?

How do I really know if my customer is honest and reputable?

If I am importing from overseas, why won’t my vendor extend me credit and give me payment terms?

This is where an import/export factoring company can be a great asset to your business.  These factoring companies specialize in international relations.  They have agreements with other factoring companies worldwide to help make sure that your business transactions run smoothly on both ends.  They may even be able to negotiate a letter of credit for you. 

Don’t think just because most of your business takes place overseas that a factoring company would not work for you.  You just need to find the right factoring company for your business.

Best Invoice Factoring

With the economic position we are in as a nation, many businesses are trying to figure out a new way to ride it out.  Banks are not lending, or making it very difficult to borrow, and it is making it difficult for business owners to keep their doors open.  Even if you can get approved for a bank loan it may take some time to process, in the meantime you are falling short on your cash flow. 

In this past year invoice factoring has become more popular than ever because it can be processed so much quicker. 

At bestinvoicefactoring.com you can search for factoring companies by industries such as medical, transportation, import/export, manufacturing, and structured settlements (just to name a few).  You can also search invoice factoring by state.

Spruce Up Your Business With Factoring

Spring will soon be upon us.  Now is the time to start “spring cleaning” your business.  There are a number of ways to make your business more attractive and draw in more customers.  Take a look around your business, what can you do to make your business more attractive to customers? You may wish to consider:

• Giving your building a face lift.  New paint, tile, siding?
• Reorganize.  New shelving? Signage? Labeling?
• Upgrade. Lighting? Registers? Carpet? Tile?
• Improve stock. Resupply? New Products? More Products?
• Clean. Hire professional cleaners.

But with the economy in a slump, business not picking up to where it used to be, and banks tightening down where are you going to get the money?  INVOICE FACTORING!  It is a great way to sell off some of the invoices your clients have not paid yet and will give you instant cash flow to do what it takes to spruce up your business and draw your customers in.

Switching Factoring Companies

Sometimes it becomes necessary to switch factoring companies.  By law you can only be under contract with one factoring company, so if your contract is not working out for you your only option is to find a new factoring company (you can not split it between two companies).  Some reasons people may consider switching factoring companies are:

The old factor is no longer professional.

Your needs are not being met.

You find a new factor that charges much lower fees.

You find a factor that better suits your business needs.

You should keep in mind that switching factoring companies can be expensive, difficult, and time consuming.  Make sure you do your research and find a factoring company that is right for you.  

Switching factoring companies works similar to a refinance.  In a sense the new factor is buying out the invoice (or contract) that is still outstanding with the first company.  You will want to consider all of these things prior to working up a financial agreement with the two companies:

• Outstanding receivables still not collected.
• Any fees still owed to the old factor.
• Amount in reserve (subtracted from the number).
• Any penalties, termination, or other fees.

Make sure that you get detailed reports of everything so that every invoice gets covered.  If you have looked at all of these things and feel it will be beneficial for you to switch just make sure you consult with all the proper people to ensure nothing will come back to bite you.

Freight Bill Factoring

Managing a trucking company can be difficult, and one of the most difficult aspects  is cash flow. Cash flow is the way money moves through your company. In the trucking industry it is typical for  clients that pay 30 to 60 days after you have shipped for them.  This can make your cash flow become a little strained.  Even though your customers have not paid you yet, you still have trucks to maintain, payroll to personnel, fuel costs and more. One way to cover these expenses while you wait for your clients to pay is freight bill factoring.

If you are a small trucking company you know it can be tough to get traditional loan financing, even medium and large companies can have difficulty.  If you are start up trucking company, or if you are going through a rapid period of expansion, you often do not have the available credit for traditional loan financing.

In such cases, freight bill factoring can help you obtain the capital you need. In freight bill factoring, a financing company – called a factor – buys the freight bill from you and advances you the cash. The factor will often in turn collect from the customer, so once you turn the invoice over, you no longer need to worry about it.

Summary of Invoice Factoring

Just for a quick overview of what invoice factoring is and how it works, this is a very basic sample of how ABC Services receives money from products sold to companies X and Y through the invoice factoring process:

• ABC Services delivers products to Company X and Company Y.
• ABC Services then sends Company X and Company Y an invoice for its products. At the same time, ABC sends copies of the invoices to a factoring company.
• The factoring company gets the invoices and advances funds to ABC Services.  ABC Services can then use the funds to help the business.
• The factoring company waits to get paid. Once they get paid, the transaction is settled.

Naturally, the invoice company takes a certain fee or percentage on each invoice, but in difficult economic times when waiting 30-45 days for invoices to be paid can mean the difference between keeping your business doors open or closed, the cost of factoring may be minimal.

Start Up Business Cash Flow

If you are in the process of starting up a business you are aware the costs can add up quickly.  To start with you will have the following:

· Licensing fees from the state and local governments.
· Attorney and other professionals consultation fees.
· Leasing or purchasing a facility.
· Renting or buying equipment.
· Hiring and paying personnel.
· Purchasing  materials/goods or inventory.
· Connection fees for such services as water, heat, electric, Internet, phone. · Software programs for accounting, supply chain management, and other business need.
· Advertising and/or marketing campaigns.

So, where do you get the money to pay for all this?  Perhaps a small business loan but in the economic crisis happening around the world it may be difficult to find a bank willing to loan money for a start up business.  Where is your cash flow going to come from during this time?  If you have invoices starting to build up from customers but it may take 30 days or so to collect you can sell those invoices to a factoring company and they will take out their fees and give you cash for the balance.  Then you do not have to worry about collecting on the invoices and you have cash flow to get you by while you build up your business.

Factoring Services

Some factoring service companies offer additional services that complement invoice factoring.  Some of these services include:

• Invoice services. Many businesses find it more cost effective and time efficient to outsource their invoicing.  Invoices can be created, stored in a computer database and mailed for you.  Payments can be entered and clients can receive regular reports.
• Collection services. Many factors  provide collection services. You will benefit by saving time and money and letting them collect for you.  Sometimes, the factor may buy the invoices at a discount and will pay you cash for them. This is known as discounting. This is different from their collections services.
• Accounting services. Some factors offer accounting services and payroll services. By using invoice factoring and accounting services from the same company it can simplify things for you.
• Bank relationship services. In times of financial hardship you want to maintain bank relationships, and communicate with financial institutions.   Some factoring services can help in this area as well.  Letters of credit can also be issued, along with other financial services.
• Credit counseling and management. Factors are experienced in dealing with cash flow, management and credit issues, and can help you in these areas. Some help with credit counseling and other credit management services plus help you with your cash flow.