If your company’s freight trucks have mechanical issues that are keeping them from running, then you are hemorrhaging money right and left. The most successful trucking entities and individual owner-operators have a system in place to get their trucks fixed with the least down time necessary. A mobile repair unit can handle most of the basic repairs that come up, with costlier repairs coming at a service station. When this happens to you, what plan do you have in place?
It’s not inexpensive to pay for repairs that come up on the fly. Smaller fleets and individuals sometimes have difficulties coming up with the cash, and when they have to front major repairs, then they have to scramble to come up with cash for other basic operational needs, even as simple as fuel to power the trucks.
But here’s the deal – if your truck isn’t hauling anything for you, it’s not bringing in any money. So you may find yourself in a position where you need money to keep your operation going, but your moneymakers are sitting on the side of the road.
You’re far from the only person who has gone through this sort of situation, and lenders have come up with a way to help you get through it. If you have carried some loads for customers in the past but have not yet received payment, you can use those outstanding receivables as collateral for financing to get the money you need for repairs now.
A lot of commercial clients make truck companies wait 30 or even 60 days to get paid for their loads. So you may find, particularly if your company is still growing, that a lot of your cash is sitting tied up in invoices that have not been paid. If your truck needs to be repaired now, though, you may not have the luxury of waiting for that payment to come in.
This is where freight factoring financing comes in. This is a quick form of funding that you can use to get your truck(s) fixed as well as to take care of any other operational expenses that have come up.
Here’s how it works. Factoring companies provide the lending to you on the basis of your unpaid freight bills. If your company is smaller, you might want to use one transaction to finance multiple freight bills. In situations like this, you get between 93 and 97 cents on the dollar from the factor, and you get that as soon as the client has verified receipt of the load. The remainder is the fee for the factor company.
If you have a larger fleet, you may prefer to do the financing in two installments. You’ll get 90% up front, upon verification of receipt of the load, and then the last 10% (less the fee) comes to you when the client pays the bill in full. These two-installment transactions are generally cheaper, with the fee ranging between 1.5 and 2.5 cents on the dollar.
Once you send in your documents (and they are all in order), you can often get your funding within two business days. Depending on the company, and the quality of your paperwork, it can take up to ten business days. The funding time is definitely something to ask the factor company about before submitting your paperwork.
Qualification for this sort of financing is not complicated. Your clients have to have solid credit, because the invoices that they have not yet paid are the security for the factor’s financing. You must have valid authority to issue invoices, and there cannot be any other encumbrances on the invoices.
If you need money now to pay for repairs to your freight fleet, then financing your freight invoices in this way can make a lot of sense. A lot of transportation companies make use of this to keep a more regular cash flow and gives them ready liquidity to fund expenses. That way you, as the owner, can focus about expanding your business instead of day-to-day cash matters. Consider factor financing as a way to keep your company moving smoothly even when the engines on your trucks aren’t doing quite the same.