What is Transportation Factoring and Freight Receivable Financing?
Troy Business Grouphas a team of seasoned Business Financing Consultants that specialize to both Transportation Factoring and Freight Receivable Financing.
What companies could use Transportation Factoring or Freight Receivables Financing?
- Intermodal and container companies
- Owner-operators
- Dump truck haulers
- Large transportation fleets
- Freight brokers
- Long-haul truckload, local delivery or international
- Haulers for credit-worthy shippers
- Wholesale or Distribution of Consumer Goods
- Transport companies that have not pledged accounts receivable as collateral
- Hotshot drivers Local
- Box Truck Operators
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What is Transportation Factoring?
Transportation Factoring is an Invoice Financing based product funded by lenders that works with any company with creditworthy Transportation Invoices to pledge. The product will purchase an Invoice from the Transportation company for any approved invoice that is payable, anywhere from net 10 to up to net 60 business days. This allows the lender the full right to execute the collecting on the invoice from the client directly, when they are due for payment. Since the lender is purchasing and collecting upon the invoice, Transportation Factoring has the highest advance rate against the face value of the Invoice. Providing companies that operate within this industry the ability to draw up to 97% of the amount owed from their credit-worthy.
Transportation Invoices. Once the invoice is paid the transaction is closed out and the balance of the invoice is remitted to the Transportation company minus of course the cost of capital fees. This product allows companies within the Transportation sector to be able to free up capital from their existing invoices to redirect toward the growth of their business as best as they see fit.
This working capital program enables Transportation-related companies to monetize outstanding invoices and get paid almost immediately for work or hauls already delivered. Transportation Factoring, also known as Freight Factoring, accomplishes this by a lender buying the invoices of Transportation, Freight, and Trucking industry companies.
Converting up to 97% of their Invoice’s face value into cash within a couple of days. This would be considered the Advance Stage of the process. The company can redirect those funds as it sees fit within the business. Whether it is taking on additional hauling routes, hiring new drivers, fixing or adding to their fleet of vehicles. Regardless of each company’s specific reasons once the funds are allocated. the capital that is being freed up can be used as needed. Then the next stage is the Rebate Stage of the process. After net 10 to up to net 60 days once the creditworthy Transportation client has paid the invoice in full.
The full invoice value will be paid to the lender by the client. The lender will return the funds that were advanced to the Transportation company in the first stage. The remaining funds will be remitted to the Freight or Trucking Company minus the cost of capital factoring fees. If a Transportation company has creditworthy clients plus a steady flow of business. The approval process may be relatively simple. Since the average Transportation Invoice is typically paid somewhere between Net 30 to Net 60 business days or sometimes more to the Freight or Trucking Company that did the hauling. Companies involved in the transportation industry can sometimes have some cash flow constraints, in between covering all of the operating expenses and waiting to be paid for their Trucking Accounts Receivables. Freight or Trucking Companies can remove the need to wait to be paid. By utilizing Transportation Factoring to unlock the liquidity trapped in their receivables.
Transportation Factoring can be a consistent source to ease tight cash flow circumstances.
This helps small and mid-sized businesses accomplish their receivables and cash flow.
It is easier to receive Transportation Factoring in comparison to—Traditional Business Term Loans Loans, and other long-term financing solutions are often harder to get. If you do not have the best credit, Transportation Factoring might be the most practical choice for your business. Your clients are paying the invoice factoring company, so your client’s credit is more relevant than yours.
Speeds up your operating cash flow—It is no secret that carriers need to be paid, and they need to be paid what the clients owe them. Unfortunately, this can take somewhere between 30 and 90 days. Transportation Factoring lets Freight and Trucking related companies provide advances to trucking companies on the same day.
The company will have money to spend on growing your business— Usually, it is more challenging to take on more jobs if cash flow is tight, but Transportation Factoring lessens this matter. It will be much easier to meet the increased demand because the company will be capable of using the money to hire more drivers or for other day-to-day expenses.
There is no debt to repay— Transportation Factoring helps you avoid taking on new debt. It is not a loan, so there is no expectation of paying something back.
Ensure there are adequate funds available to cover fuel, vehicle maintenance, and repair, containers, drivers’ payroll, licensing fees and insurance expenses Improves cash flow which helps toward running operations in a more effective manner It could help to ensure cash is available to bid on future jobs
The excess capital could be used to expand the company’s vehicle fleet to take on new routes or haul additional loads
Provides extra working capital that could be used to invest in marketing or promotional activities to attract new business.
SUBMISSION PACKAGE
Signed Application 6-12 Most Months of Business Bank Statements UNDERWRITING DOCUMENTS 2 Most recent years of Business Financials Including Profit & Loss and Balance Sheet 2 Most Recent Years of Business Tax Returns Copy of Most Recent 941 Filing Full Aged AR Reports with Detailed Payer Information by Insurance Provider Accounts Payable Aging Summary The owner (s) Personal Financial Statement Company Debt Schedule Proof of Ownership To be approved by transportation factoring companies, you’ll need to provide the following documents along with the complete an application and business financial documents requested above:- operating authority
- proof of insurance
- Articles of Incorporation
- A current customer list.
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What is Freight Receivable Financing?
Although it works like a recourse based factoring product, Freight Receivable Financing is an Asset Based Lending program provided by a lender to Freight, Transportation, or Trucking related companies. It is a flexible approach to factoring, whether recourse or non-recourse, that enables a Transportation-related company to achieve better-priced financing than typically offered by traditional factors. This product works as a conventional form of Accounts Receivable Financing. Freight Receivables Financing provides an A/R based Revolving Business Line of Credit for Freight or Transportation companies by using all or most of the Freight Invoices as collateral for the line. Freight Receivables Financing enables Transportation-related companies to have flexible access to working capital when needed, without having to sell their Accounts Receivable Invoices in a factoring arrangement for up to 85% of their invoices face value.
Freight Receivable Financing, like with most A/R based products are funded using two payments: The Advance and The Rebate.
The Advance Stage
Whether a company provides Transportation, assembly, packaging, or warehousing, etc.
The advance stage is provided to your company as soon as the services have been provided or delivered and accepted by your client for which an invoice is provided. A lender will validate everything about the Invoice and then release funds. The advance rate is based on a percentage of the Invoice and ranges from 70% to 85% of the face value.
The Rebate Stage
Once the Transportation client pays the Invoice, the lender will remit the remaining percentage balance. The finance fees are reduced from this payment.
The Advanced Stage:
Once a Transportation-related company is approved for Freight Receivable Financing, the company is free to submit invoices for funding pretty much immediately. This way, they can generate the capital that allows them to convert their idle invoices into liquid funds as needed.
With Freight Receivable Financing, a Transportation-related company maintains its own collections relationship with its customers. For the lender and the borrower to be able to track when customers are making actual payments. Transportation-related companies must agree to divert payment for all submitted invoices into a lockbox of sorts, that is duly monitored by both parties. Every lender will have a professional and efficient invoice management process, to follow up and to help ensure that your customers are paying following the invoice terms. Along with a timely detailed web-based reporting, that can check to see who has paid and who has not 24/7.
Borrowers will then receive their A/R based revolving business line of credit in exchange. This credit line transportation-related can draw from as needed for a fast and flexible source of capital. The maximum amount of capital you can draw from is mainly determined by the amount offered by your receivables leveraged. With a Freight Receivable Financing A/R based revolving business line of credit, you don’t have to use what you don’t take out. Instead, draw only the amount the company needs, and the rest will still be available to use as needed. All while agreeing to point the remainder of the client pays to the lockbox until your customer pays their Invoice.
The Rebate Stage:
Customers will not be notified if you use Freight Receivable Financing, making this the ideal choice over non-recourse for Transportation Factoring business owners who wish to maintain their collection relationship with their clients, to protect their reputation.
Once the final invoices are paid, the lender will release the remainder back to your business, minus a financing fee – depending on your contract terms typically 1.5% for every 30 days; the Invoice is outstanding. With Freight Receivable Financing, a Transportation-related company is ultimately responsible for their unpaid invoices. Recourse financing fees start as low as 1% for every 30 business days. This product is best for more substantial scale invoices for clients with excellent payment history. Knowing if your clients are in good credit standings can increase the likeliness of payment but will not guarantee it. Most lenders will offer credit checks to raise your awareness of your client’s creditworthiness.
Instead of a Transportation-related company having to wait up to 60 days or more to get paid by their clients, a company can now get an immediate advance against their invoices. These funding vehicles will allow businesses to maximize their cash flow and improve their position by taking out an advance based on their Freight, Transportation, or Trucking related invoices. Your company could get quick liquidity, while a lender holds the Invoice(s) and waits for payment. The transaction can be completed as soon as your client pays for the services in full, or it can replenish, and the process can start over again.
A/R based Lockbox Account
What Is Lockbox Banking?
Lockbox banking is a service provided by banks to companies for the receipt of payment from customers. Under the service, the payments made by customers are directed to a particular post office box instead of going to the company. The bank goes to the box, retrieves the payments, processes them, and deposits the funds directly into the company’s bank account.
How Lockbox Banking Works?
For businesses that receive a large volume of payments or large-denomination checks accompanied by remittance documents, a lockbox arrangement can streamline collections and payment processing. Utilizing advanced lockbox technology, banks have established multiple communication hubs for businesses to use to receive payments and deposits.
A company creates a post office box to accept payments from customers. The bank couriers process the day’s deposits and send to its processing center. The business’s remittance documents are scanned, payment information is captured, and clearing updates are transmitted to its accounts receivable. Each night, the business’s lockbox data is backed up for secure storage and easy access.
A Freight Receivables Financing A/R based Revolving Business Line of Credit enables your trucking business to have flexible access to money when needed rather than selling your accounts receivable in a factoring arrangement.
Our flexible approach to factoring, whether recourse or non-recourse, enables your Transportation company to achieve better-priced financing than typically offered by traditional factoring.
This AR factoring is a financing option with greater flexibility and a lower cost of capital compared to standard small business loans.
Recourse freight factoring may also be a good option if your clients are reliable and pay in a timely fashion.
The “revolving” nature of the Freight Receivable A/R facility allows a Transportation-related company to add capital back into the credit line, where it gets added back into your total maximum. This capital can then be withdrawn once again if needed.
Improved Credit Score in addition to the debt-free cash flow, there are potential benefits for your company’s credit score, too. With timely funding, you can stay on top of your payables.
This is a viable alternative to Bank Loans, many businesses, from startups to mature enterprises, do not have the collateral or credit profile to take out a loan. Some companies are not interested in making monthly loan payments. In either case, Freight Receivable Financing is a great option.
Ease of Process, the application process is simple compared to a bank loan. And once you have been approved and set up, the ongoing funding process is simple. Your Freight Receivable A/R based Revolving Business Line of Credit can quickly grow as fast as your company.
Collections control, unlike with Transportation Factoring Freight Receivable Financing, they will not be buying your invoices, only providing a recourse based advance against the invoices and therefore allowing Transportation-related companies the ability to maintain the collections aspect of their sales cycle.
Less Stress when you are self-assured that you can pay your bills and meet payroll on time, it is simpler to focus on the operational aspects of your business, leading to sustained success.
Growth Opportunities increased, as cash flow allows you the potential to grow and expand your business as soon as the opportunity arises. You don’t have to wait for a bank to approve a loan to make that quick purchase—because you already have the cash you need.
Funding is available to Startups and Higher Credit Risk Companies because Freight Receivable Financing will look to the strength of your customers, as well as your company’s financial history. A/R financing is perfect for startups, high growth businesses, or companies that experienced some financial challenges.
Count on professional cash management services when you work with Freight Receivable Financing, you can set it and forget it. The cash management programs will take care of all the paperwork, processing, and collections. We serve as an extension of your company so you can concentrate on the essential aspects of growing your business.
SUBMISSION PACKAGE
Signed Application 6-12 Most Months of Business Bank Statements UNDERWRITING DOCUMENTS 2 Most recent years of Business Financials Including Profit & Loss and Balance Sheet 2 Most Recent Years of Business Tax Returns Copy of Most Recent 941 Filing Full Aged AR Reports with Detailed Payer Information by Insurance Provider Accounts Payable Aging Summary The owner (s) Personal Financial Statement Company Debt Schedule Proof of Ownership To be approved by transportation factoring companies, you’ll need to provide the following documents along with the complete an application and business financial documents requested above:- operating authority
- proof of insurance
- Articles of Incorporation
- A current customer list.
Available Capital Limit
Up to $10M+ per Invoice
Standard Interest Rates or Cost
Rates start at 1.5% for 1st 30 days
Typical Underwriting TimeLine
5-10 Business days
Average Term Limits
12 to 24 Months
In closing, Transportation Companies are part of the lifeblood of this country by finishing the last mile of virtually all deliveries Americans need to live and survive. The large corporations these companies haul for pay on invoice terms that can range from as quick as net 15 business days to as far out as net 90 business days.
We here at Troy Business Groupare a Full-Service Business Financing firm that specializes in accounts receivable factoring and financing for the Transportation Industry. We understand the unique challenges of the Freight Industry and can provide the financial support your company needs to help manage growth, take advantage of opportunities, or help fund payroll. Troy Business Grouphas a team of seasoned Business Financing Consultants that specialize in providing clients with access to both Transportation Factoring and Freight Receivable Financing. Please apply online, email us for an appointment, or call us today. Our team is committed to helping your business grow with Transportation Financing and Freight Receivable Financing and will guide you through the loan process each step of the way.
