Factoring invoices is beneficial for a number of factors. It permits a truck firm to raise cash without acquiring new debt. While financial obligation is in some cases essential, the majority of trucking firms would prefer to raise money without obtaining cash. Debt is risky, and when it cannot be repaid, assets can be repossessed. If the debt is large enough, it could even force a truck companies out of business.
Will You Help me Get Money? - Choose A Freight?Factoring Company Instead Of A Typical Bank Funding
Exactly how to Enhance Cash Flow Without Loaning -Cash Money flow is one of the primary reasons companies fail.
At one time or another, every business, even successful ones, have actually experienced bad money flow.
Cash flow does not have to be a problem any ever more. Do not be deceived -- banks are not the only places you can get financing. Other solutions are available and you do not have to borrow. What is trucking factoring ? One solution is called trucking factoring. Trucking Factoring is the process of selling accounts receivable to a financier instead of waiting to gather the cash from the client. Oh, the Irony- Truck factoring has a paradoxical distinction:
It is the monetary
backbone of numerous of America's most effective businesses. Why is this paradoxical ? Because truck factoring is not taught in business colleges, is seldom discussed in company plans and is relatively unknown to bulk of most of American company people.
Yet it is a monetary process that releases up billions of dollars every year, allowing thousands of businesses to grow and succeed. Receivable Loan Financing has actually been around for countless years. Receivable Loan Financing Companies are financiers who pay cash for the right to get the future payments on your invoices. An unpaid receivable or invoice has value. It is a debt your client has agreed pay in the near future. Factoring Principals--Although factoring
deals solely with business-to-business deals, a big percentage of the retail business utilizes a factoring principal. MasterCard, Visa, and American Express all utilize a form of factoring in their retail deals. Using the purest definition of the word, these big customer finance business are really just large Receivable Loan Financing Companies of consumer paper. Consider it: You purchase at Sears and charge
it to your MasterCard. The store makes money almost instantly, although you do not pay up until you are prepared.
For this service, the charge card company charges Sears a charge (typical common normal charges vary from 2 to four percent of the sale). The Benefits Trucking factoring can provide numerous benefits to cash-hungry companies. Rather than wait 30, 60, 90 days or longer for payment on an item that has actually already been delivered, a company can factor (sell) its receivables for money at a little price cut
off the dollar value of
the invoice. Payroll, marketing efforts, and working capital are simply a few of the company needs that can be met with instant cash.
Invoice Factoring offers the means for a producer to renew stock and make even more products to offer: There is no longer a requirement to await for earlier sales to be paid. FACTORING is not simply a money management device for manufacturers: Almost any kind business can take advantage of FACTORING. Typically, a business that extends credit will have 10 to 20 percent
of its yearly sales bound in accounts receivable at any given time. Think for a minute about how much is tied up in 60 days' worth of invoices: You can not pay the power bill or this week s payroll with a customer s invoice, but you can offer that invoice for the cash to satisfy those responsibilities. Using trucking factoring companies is a quick and easy process. The factoring company buys the invoice at a price cut, typically a couple of percentage
points less than the stated value of the invoice.
The U.s. Transportation Association mentions that there around 200,000 work with truck companies and 276,000 personal companies trucking companies licensed to run in the States that carried, according to their latest listings of millions of products, materials and basic products . There are a number of common carriers
or in groups on our nation highways carrying these important products to our stores, factories and harbors.
Furthermore freight factoring corporations aid many of them and offer their accounts receivablesfinancing services nationwide counting including the following states.
Alaska, Arizona, Arkansas,
California, Colorado, Connecticut, Delaware,
Florida, Georgia, Hawaii, Idaho State,
Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska,
Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming
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Trucking Factoring Situation Articles
Since the mid 1980s Lambert Truck & Haul have been successfully running their freight business. For more than twenty years they've been delivering goods for most major industries in the nation, with business booming as they traversed the country, in all kinds of weather, for all kinds of clients. During the heady times from 2002 to 2007, Lambert was a top rated accounts receivable mastermind of the trucking industry. Few customers were ever late on bills and those clients who were, were sure to turn in their late payments within a reasonable amount of time. Cash was flowing and times were good for all.
But a short year later, in the fall of 2008, when the United States economy took a nosedive and businesses both small and large began to feel the pinch on their pocketbooks, those that used to make their demands had suddenly and largely gone silent. Business slowed down. And worse yet, Lambert had noticed during the early part of 2008 that though the bulk of their clients were always on time with payments, the few late-bloomers there were, had seemingly started to spread this illness. Spring changed to summer, summer changed to fall, and the CEO of Lambert, John Rondstadt, was beginning to feel very uncomfortable indeed whenever he looked at their weekly Accounts Receivable reports. There was a growing list of clients who now owed them back debt.
He had already been to the administrators to ask what the actual problem was. Were they doing something wrong or different when it came to reaching out to delinquent accounts? By his bookkeepers records, this wasn't the case. Perhaps he was losing his customers to his competitor, who seemed to offer very low prices with no guarantee of quality or performance, and these clients who were in debt to his company had possibly disappeared leaving him stranded. Perhaps they were unable to pay their debt to him, but were able to meet the costs of a lesser service. So he did the necessary research and, after discussions with friends in the same field, he realised that no, his customers hadn't gone anywhere else. The had just gone!.
This current state-of-affairs was causing John Rondstadt to have some very restless nights. He had employees to pay, goods to ship, trucks to maintain and overhead that was almost unbearable when compared against the lack of funds that were coming in. After work he would confide in his wife, Linda, and neither were unable to stop the constant worry over the lack of funds.""Lin, I have a really bad feeling,"" he would say with deep woe.""Well, what do you think it is?"" she would say.John would stare off into the distance, and then slowly close his eyes. He could see the fleet of trucks he had purchased over the years. He could see them traveling, bringing goods to all of his clients. But then a haze would cover his trucks and his vast fleet would vanish to leave just a few. What could cause this ultimate death spiral of business?
""I think I know what it could be,"" John said. ""I've relied too long on the profits I receive from invoices alone. For too long I've been allowing our clients to let their accounts become overdue."" All Linda could do was hold his hand and look at him tenderly. 'We know it's a difficult economy at the moment - perhaps it will take a while for people to get on top of their bills'.""John knew his wife meant well, but he knew that he was responsible for too many people to sit idly by, waiting for the sun to peak over the clouds.
The next day John strolled into his office and was determined to sit down and make every phone call to every client who had owed Lambert money. Now, it wasn't the most efficient way to spend a day as a chief executive, what he really needed to be doing was to be overseeing all of the other intricacies of shipment and delivery and reaching out to prospective clients or retraining his sales team to do the same. Even though he was doing something to help his company, he knew he had folks on salary to do just this thing. Wasting money, wasting time - even with the best of intentions, John knew that he was in trouble.
Poor John spent the whole morning trying in vain to contact his debtors: they promised to call back, dodged his calls, or made small interest-only payments. He was beginning to feel quite despaired when his secretary knocked on his door.
""Can I have a word with you John?"" she asked standing in the doorway.""Sure thing Bev, come on in."" John leaned back in his chair and looked expectantly at Beverely.""Well John, this afternoon I did some research, trying to work out how we're going to get out of this mess."" She pulled a small stack of papers from a folder and set them on the desk before him.""Have you ever heard of factoring?"" she asked.""It sounds vaguely familiar. What is factoring""? he asked.She began, ""Well, it's really very simple. Basically, factoring invoices means that we would get paid immediately for the loads we haul.""John interrupted ""Immediately?"".
""Immediately, yes"" she added, ""It's actually very simple. We can have an expert account manager review our numbers and help us complete a company profile. Included in the profile would be the investigation of our accounts receivable aging reports, our current customers' credit limits etc.. Additionally, the factoring will help to determine the creditworthiness of our customers independent of their credit history with our business. It provides a very broad view.?
?John replied cautiously ""I see - and what happens then???Following the completion of their review and once we've been approved for a contract with the factoring company, then we sit down to negotiate conditions and terms. You'll be surprised at the amount of flexibility, all dependent upon the credit histories and business volume. This company tells us what the cost will be to purchase factoring for our accounts receivable. Once we arrive at a mutual agreement, the funding begins.?Leaning forward, John studied the documents very closely.
""I don't know, Bev - it just sounds too good to be true"", John said quietly.""Yes, I know; that's exactly what I thought at the beginning. But really, they have guaranteed us experts that do all the legwork, which would free us up here to focus on our clients in good standing and marketing, all that good stuff. They appear to be very flexible, John,"" she drew a circle around a paragraph on the document before him.""How flexible?"" he asked.""They personalize the factoring rates so that the amount they are willing to take on is commensurate with our needs and our client?s debt. Apparently they can figure this all out in two to four days. ""
""It does all sound pretty good, remembering that we're all tapped out now with loans from the bank last year to repair vehicles, and we all know just how tight money is. It's imperative that we keep the business rolling as usual, and every day we go unpaid we're getting closer and closer to dealing with some serious issues in both the short term and the long term,"" said John.He took a deep breath and looked at his secretary with something she recognized as hope.""Precisely?. I think this might just be a way out of the trouble we're in with these folks who owe us money.""John took a moment to think about this solution, and agreed with his secretary. The clients who owed them money were long standing friends and professional resources of Lambert. Just because they were experiencing difficulties paying their own bills now, John was very concerned about losing these relationships. He was well aware that the economy was in a bad way and that it might be quite a while before things started picking up. That unknown amount of time, if he handled these debtors incorrectly, could spell disaster for both of them. He didn't want to lose business but he also didn't want to lose any more money.
""Well, let me think about this tonight Bev, thank you."" Bev nodded, stood up and left the office feeling that she had helped her employer keep on his shirt and hers too.John stayed at his desk for a long time, looking over the details they hadn't discussed during their meeting. He wondered if there might be other problems freight factoring could help Lambert Truck & Haul with? Running his pencil down the sheet, he noted that the freight factoring company could assist with fuel costs, fuel advances, and fuel discount cards. In fact, Lambert could receive up to fifty-percent cash advances upon load pick-ups. As a man who hated binding contracts with no room to breathe, he was pleased to see that this factoring company would not make him sign a long term contract, would not make him pay any sign up fees and there was no minimum volume required.
""I must tell Billy the good news,"" muttered John to himself.Billy is John's son-in-law, and he really admired the ideas behind Lambert, so much so that only two years before he had started his own transportation service business. At that time John knew the struggles Billy would face, but he still encouraged him to follow his dream. With the faltering economy, if a big fish like Lambert was hurting, a little guy like Billy was about to catch his death. But, maybe the answer for both of them was in freight factoring, and John was going to find out very soon.
A few short months later, after completing the application process, having the legal experts review his credit history, accounts receivable, and statements, finally John was beginning to find his way out of the hole his debtors had created for him.They took on reasonable factoring purchase contracts and stopped spending their precious man hours scrambling to collect debt. They took that time and refocused effort to offering competitive prices in new territories. John looked back on the dismal months of life before freight factoring and almost shuddered at the thought. He probably wouldn't be in business today had he not learned just in time about freight factoring.
More Trucking Factoring Company Situation Articles
A thick smoke came out and Jim Burton felt a sense of deep disappointment. His truck?s engine was done. Jim was totally disappointed that he couldn't keep himself from slapping the hood of his truck all because he has a new crew of welders which would need his extra attention. He had known the truck?s engine was dying long ago but he just thought if he kept making a few repairs that he could have it running a bit longer.
His company the Burton Oilfield Services just could not afford to purchase a new truck. Everything had gone into buying the pneumatic trailers so they could jump into the thriving frac sand hauling business. They brought good for the company however they were also quite a bit expensive.Burton had kept the company small and just handled welding since the start, though a company was like a child and needed to grow. The frac sand business began to boom in their area so he made a decision to invest all the company's money into this because its really not easy to feed a family using only the white paper where invoices are printed on. Now he had worries beyond a couple newbie wielders, buying a new truck could mean trouble meeting payroll at the end of the month.
His employees will surely be unable to pay their bills using the invoice and they could surely not wait for 90 days for the customers to make payments.
His friend named Dan had given him advice to utilize a factoring company so he could buy new trailers for the company during an Elks Lodge meeting. Dan was telling him about it because he had bought a pneumatic trailer too with the factoring money.
There is always a sense of competition between the two of them however Jim also knew that he is way behind compared to Dan.He thought perhaps the factoring thing could also work for him and his company and maybe he could finally found something to brag about to Dan at the next Elks Lodge meeting.Jim hitched a ride from one of his crews to return to his office. He received good feedback on the new guys so he began to do investigation on factoring companies using the internet. There were so many companies offering factoring services. Some factoring companies were huge and also handled factoring for other industries. Some were small and only focused on oilfield services. He went for half and half. He called a few of the big companies and he called a few of the smaller ones.
What he learned about factoring amazed him. Well, he couldn?t believe it. No interest was needed to be paid, so he didn?t have to spend one single cent extra beyond the invoice amount to get the money. It was certainly a more attractive deal than a bank loan which was always the amount of money you needed and then the amount you had to pay in interest. Credit was also not an issue and he was not even asked about it plus there was no background check on his or the company's credit report. All they cared about was the reliability of his customers who he himself had already carefully checked.
Jim didn't loved anything more than being out working with his men.He hated being trapped in the office doing paperwork and he preferred the laughs with the guys much more the meetings with his administration.It was a big thing for him that the factoring company will take over a huge portion of his office work by offering services such as analyzing credit for new potential customers, collecting payments, and doing most of anything related to billing. He also had the choice of which accounts he would allow the factoring company to handle so he can keep those accounts which are in close business with the company. Jim had a sense of confidence since he knew that the factoring company has already started a great working relationship with most of his most important clients, therefore it was an easy move to put all of them in the accounts receivables to be handled by the factoring company.
The moment he had already picked a factoring company to work with, he just needed to complete an application form and have his secretary fax all required documentation including the accounts receivable report.It was so fast and the next thing after that is that the factoring company already sent him a copy of the contract which he had to sign and then the payment for the invoices was already paid immediately to Burton Oilfield Services. The money wired over was nearly 85% of his invoice. Some money had been saved as a reserve by the factoring company and would be reimbursed once the invoice was paid in full by the customers, but Jim had no worries. He had trust in his clients who were on the list and had confidence that he will have all the money sooner. The core of the money was already in his pocket and ready cash flow for getting the things done that the company relied on.Jim and his company are now able to expand to more work. He just had to keep the receivables coming so that money would be ready and so he is able to bid for twice as much jobs as compared to before when he didn't use factoring yet. Now he did not have to worry about where the money for equipment, men, or even the fuel for transport would come from for the new projects. Also he could hire more journeymen pipe layers and skilled welders for big automated welding projects or to become the leader in hand weelding. He can imagine feeling so proud while telling Dan at the next Elks Lodge meeting that he has purchased new cold bending equipment. One of the things Jim really wished to do was to be able to give a raise to his workers. They hadn?t had one in nearly a year and half. The union men had been on him but he honestly felt the crews deserved a bit more in their paychecks.
Factoring gave him a lot of possibilities which he never imagined would be possible for him. A more stable cash flow would enable him to pursue his dream of expanding his business and seeing it become a huge company which he knew it is capable of becoming.