Managing cash flow can be a struggle for any business, especially when they find themselves at the mercy of high-profile clients who owe them outstanding payment for services. One industry where this is an ongoing problem is trucking and transportation. The bureaucracy surrounding invoicing and reimbursement on the customer’s end can lead to unsettled payments for anywhere from one to three months. Larger business may have enough reserves accumulated to wait this period out, but not every growing enterprise is this fortunate. Often start ups see very few options but to borrow money from banks or other financial institutions, which can cost them in interest rates.
Furthermore, not all companies are eligible for the bank loans they need when just starting out. Banks often require an exceptional credit score and the existence of physical assets (like real estate) for collateral. Should a business be qualified, it may still take some months before the funds are fully secured. Thankfully, factoring provides businesses who need their funds turned around quickly with an alternative option.
Typically, a third-party factoring company will purchase outstanding invoices at a discount in exchange for immediate cash to improve cash flow. Flat fee factoring is the simplest form of factoring – clients simply pay a small one-time factoring fee. For small trucking and freight businesses, Accutrac Capital is one company that specializes in this industry. Upon signing with them they will send 97% of your invoice payment to you within 24 hours less a small fee taken from the advance. The 3% balance will be refunded to you upon receipt of your customers’ funds.
With three different plans available, there are factoring options for everyone. Flat fee factoring is their most popular plan where for 1.59% of the invoice price, clients get same day funding. The company then takes over the outstanding bill for up to 90 days. They also have options for large fleets like a flexible line of credit where you only pay for funds drawn. Or, there is flex factoring for reliable customers that pay within 10 days. This plan comes at a cheaper rate but can be useful for those who need their funds instantly to support the growth of their business or pay employees. Unlike a bank, invoice factors do not look at your credit but at that of your customer’s before making an agreement.
When clients find themselves uncomfortably dependant of their customers for prompt returns, there are other ways to attain financial certainty. Factoring enables businesses to take their customers out of the picture and retrieve their much-needed funds quickly. It improves a company’s cash flow and the approval process is simpler than it would be taking the traditional route with a bank. Partner with an invoice factoring service next time your fleet goes out on a contract and take control of your business again.