Invoice Factoring keeps logistics firms trucking

Factoring, sometimes known as accounts receivable financing or invoice factoring is providing the freight and logistics industries with better cash flow positions, even in light of the spiralling fuel costs which are crippling many other firms in other industries.

Whilst invoice finance facilities such as factoring are suitable for most industries they are particularly appropriate in the logistics sector as the industry structure lends itself to getting favourable deals for the firms looking to secure such invoice finance facilities.

As with any form of commercial finance, there are variables which will be taken into account by the finance providers when assessing the risk, and therefore the rates on offer to businesses seeking commercial finance. Unlike traditional bank borrowing, factoring can even be put in place for start ups with no credit history and again, unlike bank borrowing, security in all but extreme cases is limited to the debtor book, i.e. your outstanding invoices, and no charges on any property or person guarantees are required.

Freight haulers and logistics companies are more and more turning to factoring as a way of financing their businesses with a powerful small business financing tool that both eliminates the usual 30 to 60 day wait for payment on their invoices and reduces the burden of collections and bookkeeping.

In the freight and logistics industry, cash flow is an ongoing problem made worse by the continued fuel cost increases which squeeze cash levels more than ever before. Typically, freight and logistics firms work for large national and multinational businesses and often find themselves in need of cash to pay drivers, buy equipment, fund vehicle repairs and for spiralling fuel expenses before they are in turn paid for jobs by the customer.

While many freight customers have 30, 60, or sometimes even up to 90 days to pay their invoices, the logistics company does not have the option to defer its payroll or vehicle repairs for months at a time.

Although the industry fits well with how factoring helps a firms’ general cash flow position, due to the profile of logistics firms’ clients and therefore the quality of their debtor book, negotiating a good invoice finance deal for logistics firms is fairly easy to achieve, all things being equal.

Once a logistics firm has the factoring facility in place invoices are paid as little as one day after creation so the logistics firm can in turn pay their suppliers and staff more quickly and either mitigate or avoid altogether, cash flow and late payment problems that can cripple any business.

Most small and mid-size logistics companies should easily qualify for a factoring facility. The one main requirement to qualify is that the freight or logistics company should be doing business with commercially creditworthy clients. As the typical profile of a logistics customer includes supermarkets, retail chains and other large scale businesses, the creditworthiness of clients is therefore less of an issue than for most industries and this is generally reflected in the deals available when compared to some other industries.

For new and emerging companies, whether in the logistics industry or not, invoice factoring cannot be beat when compared to other forms of borrowing. Invoice factoring companies are generally comfortable working with new businesses, so a small business start up should be able to qualify.

For more details on how Factoring Finance can help you put in place your first invoice finance facility or help you negotiate a better deal with your current facility, simply get in touch and we’ll do the rest.

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