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Receivable Factoring Solutions for Trucking Companies

Imagine if you could collect on an invoice the same day you make a delivery. What would that mean for your trucking company? Well, for one thing, it would put an end to your never-ending search for credit. Better yet, it would finally put an end to your cash flow problems. Does this sound too good to be true? Well, it isn't. Today's receivables factoring solutions simplify how trucking companies finance their deliveries and their operations. In fact, it's an asset-based lending option that not only helps you finance current deliveries, but it also helps you eliminate any outstanding backlogs.

The Rise in Popularity of Receivable Based Lending

Receivable based financing isn't just for enterprises that are unable to secure credit with a bank. Instead, it's a viable tool for securing the working capital trucking companies need to keep their business running. Receivables factoring is the most common asset-based lending option. It is relied upon as a means of financing by millions of businesses.

There are numerous benefits to using this recivable-based credit solution. First, freight factoirng for trucking companies is not a loan and you won't need to represent it as a loan on your company's balance sheet. Second, the decision to advance your trucking company funds is based on the account debtor's (your customer's) credit rating and history. This makes it an ideal financing solution for companies that have less than ideal credit ratings. While your credit rating does play a role, it simply doesn't play the most prominent role in establishing the credit line. Third, receivables factoring reduces the costs associated with receivables collection: You no longer have to chase customers for payment and struggle with long receivable collection times of 30, 60 and 90 days. Finally, it allows you to exert more control of your company's financing: You can use receivables factoring with customers who have a history of late payments, while keeping the rest of your customers under your existing financing structure.

  • Receivables factoring is not a loan and won't appear on your balance sheet.
  • The decision to advance capital is based on the account debtor's credit rating.
  • Receivables factoring lowers the costs of long receivable collection times.
  • Your company has more control over its own finances.

The Simplicity of Receivables Factoring

With receivables factoring, you no longer have to cover your bills with your own personal credit cards. Most importantly, you no longer have to face a daily struggle to balance your payables and receivables. Instead of dealing with an endless supply of issues, you'll simply benefit from an easy-to-use asset-based lending option. Receivables factoring allows you to level out your cash position, reduce your costs of money and simplify how you manage your trucking company's day-to-day operations. So how does this asset-based financing option work?

How Does Receivables Factoring Work for Trucking Companies?

  1. Instead of waiting to collect on your customer's invoice, you'll simply exchange that invoice for instant cash with a third party financing company. That financing company will transfer a predetermined amount of the invoice's value to your newly established credit line. This infusion of capital will help you finance future deliveries, eliminate any backlogs and help you finance your operations. Here are the steps to working with receivables factoring.
  2. Account Debtor Approval: You start by getting your customer approved for factoring. This involves forwarding all pertinent information about your customer, their history with your company and their records of payment. The financing company will then assess your customer's credit worthiness. Once they are approved, you are able to use factoring with that customer.
  3. Fax or Email Receivable: Next, you email or fax your bill of lading and receivable immediately after a shipment has been delivered to this customer. The financing company then purchases the receivable. This purchase means they take over responsibility for receivables collection. The financing company then provides your company with a predetermined cash advance. Your account is credited the remaining amount once the receivable is closed.
  4. Processing Fees and Interest Rates: A processing fee is assessed based on the total value of the shipment. Next, a daily interest rate is charged against the original advance you receive. This daily interest rate is calculated all the way up to the day your customer pays the financing company.
  5. Your Company Saves Time: Cash flow becomes a problem when your company has a lag between the expenses you must cover now and the payments you'll receive from your customers later. As is often the case in the transportation industry, your trucking company must cover expenses up front, while your customers have 30 to 60 days to pay you. With receivables factoring, your company avoids having to wait for payment by accessing the cash you need right now. This saves you valuable time allows you to focus on other, more pressing concerns.

There are several advantages to using receivables factoring. First, your company doesn't have to burden itself with time-consuming and repetitive credit checks. The financing company will do this for you. Second, you'll access immediate working capital. You'll no longer have to rush to the bank or push off other credit obligations just to make ends meet. Third, you'll be able to pursue any opportunity with any customer. With receivables factoring, you'll put an end to the constant cash crunch and get back to growing your business.