When You Hire Invoice Factoring Companies

Written by Business magazine. Posted in Advance business capital, Business factoring services, International factoring service

All sorts of manufacturing is done in the United States in factories and workshops from coast to coast, big and small. Finished goods such as furniture, cars, books, electronics, and even kids’ toys are being produced year round, and American farms are producing plentiful foodstuffs at the same time. But it’s not enough to merely produce those goods; they have to be transported to and from factories, warehouses, and retailers, and that’s the responsibility of the modern transportation network. This robust network boasts some 12 million trucks, planes, seagoing ships, and freight trains to deliver goods domestically to all 50 states, and many international shipments are made as well for trade. The United States imports and exports may goods to and from allied nations such as Canada and Mexico, and more beyond. However, these carrier companies may need some help with their cash flow after they deliver goods for a shipper customer, and invoices may be a long way off. This is when invoice funding companies such as Advance Business Capital and its like are employed, and freight factoring services can do a lot of good for their carrier clients.

The Work of Carriers

Most carrier companies in the United States are on the smaller side, and have a modest but hard-working fleet of trucks, or perhaps a few planes or trains or a seagoing ship. These carriers often work domestically, such as moving finished goods from a factory to a warehouse and from warehouses to retailers. Meanwhile, the United States performs a lot of truck-based trade with Canada across the expansive land border, and the U.S. stands as Canada’s largest trading partner. Trucks are often used for any delivery, since they are much more affordable than other vehicles and they can go to places that trains or ships cannot. Carriers charge invoices to their shipper customers when a deal is made, and they may end up waiting around 60-90 days for that payment to be made. Carriers also work with freight brokers to arrange meetings with shippers who need a delivery to be made. Such third parties such as invoice funding companies can do a lot of good. Why get an invoice advance loan from these invoice funding companies?

Working With Invoice Funding Companies

When a carrier has made its delivery for a shipper customer, that carrier company will charge an invoice. The problem is that most carriers are small and have limited cash reserves on hand while waiting for that invoice payment to be made. Even when invoices are paid on time (which isn’t always the case), the small carrier may not be able to cover all of its expenses while waiting for that payment. A carrier company might in fact face bankruptcy unless it turns to invoice funding companies in its area. These invoice funding companies are business-to-business (B2B) lenders who will work with a carrier whose business credit is sufficient.

Once a carrier makes a deal with one of these invoice funding companies, that factoring company will purchase the right to collect 100% of the outstanding invoice’s value when it’s paid. Until then, the factoring company will provide a large up-front sum to its carrier client, often around 70-80% of the invoice’s total value. This timely payment is essential for the carrier, which has its own expenses to cover such as staff salaries, truck maintenance and refueling, advertising costs, and more. This helps the carrier smooth out its cash flow while the invoice is outstanding. For smaller carriers, this may be all that keeps them afloat since their own cash reserves are probably thin.

Once the shipper customer makes the payment, the invoice factoring company will collect 100% of that invoice’s value, as arranged earlier. Now, the factoring company will make another, more modest payment to the carrier client, and the total loans may add up to 95-98% of the invoice’s value or so (but not 100%). The factoring company will keep the remaining 2-5% of the invoice value as its fee for its services, and this is the source of its income. The carrier will sacrifice that leftover value in exchange for the up-front loans that smooth out its cash flow, and for smaller carriers, this is usually a good deal that keeps the company running.

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