Most transportation companies – carriers and freight brokers alike – run cash flow intensive businesses. Unless they have quick pays, most of their shippers will pay for freight bills in 30 to 60 days. On the other hand, the company has a number of immediate expenses such as drivers, fuel and repairs. If the company has cash reserves, slow paying customers won’t be a problem. If it doesn’t have reserves, then slow paying customers can create serious cash flow problems.
One way to solve the cash flow problem created by slow paying shippers is to use invoice financing.
What is invoice financing?
Invoice financing accelerates the revenues due to your transportation company from shippers. This provides you with predictable cash flow, providing the funds you need to pay drivers, fuel and other expenses. With invoice financing, your shipper does not have to pay sooner. Rather, a financial intermediary advances funds to your company using your invoices as collateral. The transaction settles once invoices are paid by your shipper.
How does invoice financing work for freight transportation companies?
Generally, invoice financing integrates easily into most freight transportation companies. It works as follows:
- After completing your work, you invoice your client
- You send a copy of the invoice to the finance company
- Your company gets an immediate 90% advance on the invoice
- Once your client pays for the invoice, you get a second advance of 10%, less the financing fee
Get an invoice financing quote
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Advantages of invoice financing
One of the biggest advantages of invoice financing is that it provides freight brokers and carriers with predictable cash flow. Your freight transportation company gets immediate access to funds without having to wait up to 60 days to get paid by customers.
The funding line is directly tied to your sales and can grow with your business, provided that your clients have good commercial credit. This makes it an ideal business financing solution for growing carriers and freight brokers.
Does your transportation company qualify?
Qualifying for invoice financing is easier than qualifying for other types of funding. The general requirements are:
- The freight company must be in operation. We are happy to work with start-ups as well.
- Your shippers must have good commercial credit
- You must use the working capital to pay drivers, fuel and other business expenses