Cash flow is an ever-pressing matter for businesses. Payroll, taxes, operations, inventory, profits, and repairs depend on a healthy inflow and outflow of money from a company. <\/p>\n
Unfortunately, maintaining a steady, positive cash flow is not always possible. Many industries, such as transportation, rely on the timeliness of their customers to fulfill invoices \u2013 and customers are not always prompt to pay. When invoices fall behind, and a company\u2019s liquid assets begin diminishing, factoring is often considered. <\/p>\n
Why do companies use factoring? Are there specific scenarios when factoring is a safe, healthy option for a faltering organization? In short, yes! In the content below, we define factoring and discuss three common circumstances that benefit from the unique financing solution. <\/p>\n
In the simplest terms, factoring is the process of purchasing unpaid invoices. <\/p>\n
Traditional factoring includes a factor \u2013 such as our company \u2013 purchasing an unpaid invoice from a transportation company, putting cash in the hands of that company immediately. Once the customer pays the invoice, that money is given to us.<\/p>\n
Many trucking companies wonder if they are liable to pay the invoice in the event that the customer never pays it. It depends! There are two main kinds of factoring, recourse and non-recourse, and both address this issue differently. <\/p>\n
Recourse factoring places liability to repay the invoice in the hands of the trucking company. Non-recourse factoring assumes the responsibility of the invoice entirely. Thus, if the customer never pays back, the non-recourse factor takes the hit. <\/p>\n
Sometimes, the perfect investment opportunity appears out of thin air \u2013 right when your company does not have the financial freedom to jump on it. In other scenarios, investment opportunities are more deliberate. Perhaps you need to purchase a new fleet of vehicles or hire new employees. <\/p>\n
Regardless of the venture, investments are designed to produce exponential growth in the future. However, they require a lump sum of money.<\/p>\n
Small businesses and startups without a large customer base or steady cash flow often face this challenge: one must spend money to make money. When an opportunity presents itself, but your company is waiting on invoices to be paid, factoring is an immediate, safe solution. <\/p>\n
The importance of commercial truck maintenance<\/a> cannot be overstated. Your fleet of trucks is crucial to a thriving company, and preventative maintenance plays a significant role in business growth and resource preservation. <\/p>\n Logistics companies often look to factoring to increase cash flow for truck maintenance. The truck driver can perform some maintenance before he or she begins transport. Other maintenance requires a professional. When something breaks down, a repair person should be alerted and hired to make necessary repairs.<\/p>\n Why would a transportation company require factoring to pay for repairs? Can truck repair wait for a brighter financial future? Most often, the answer is no. Truck maintenance should not be delayed.<\/p>\n We often list five arguments for the importance of truck maintenance:<\/p>\n –\tFewer breakdowns.<\/b> Proactive maintenance will help reduce the number of unexpected breakdowns \u2013 dramatically. When a truck breaks down, shipments fall behind and jobs are delayed. Ultimately, spending money for a repair will save on future disruptions.<\/p>\n –\tFewer accidents.<\/b> Fewer breakdowns mean fewer accidents. Working headlights, working brakes, etc. promote driver safety. When truckers are safe, other vehicle drivers are protected. The well-being of your employees is worth the investment of truck maintenance.<\/p>\n –\tOperational optimization.<\/b> Maintained trucks work well! A fleet that is taken care of should operate at optimal functionality, lowering fuel expenses and lengthening the lifetime of your trucks.<\/p>\n –\tHappy customers.<\/b> Smooth shipments, without unexpected breakdowns, often result in satisfied customers. Satisfied customers are often repeat customers.<\/p>\n –\tLegal requirements.<\/b> Last, but certainly not least, the law requires commercial trucks to meet proper road safety standards. When a vehicle in your fleet needs to take a Commercial Vehicle Road Worthiness Test (CRVT), maintained trucks are likely to pass immediately.<\/p>\n Are you falling behind on payroll? Payroll factoring is an excellent resource for companies that care about the wellbeing of their employees but are experiencing an unexpected cash flow shortage. This can be all too familiar for businesses with many outstanding invoices.<\/p>\n In the three scenarios explored above, a traditional bank loan could provide the funds needed to address investments, truck maintenance and repair, in payroll difficulties. However, some logistics companies do not qualify for traditional bank loans. Why? Qualifying for a bank loan often requires several qualifications, including excellent credit and experience. Some transportation companies simply do not have those two qualifications. Perhaps you have poor credit or have just started your business.<\/p>\n Additionally, factoring can serve as a traditional bank little alternative when a company needs cash flow fast. Traditional bank loans often take time to process. Factoring is fast. Some factoring companies can begin an agreement within a few days of application.<\/p>\n Finally, when you take a loan from the bank, you have to pay the bank back! Thus a traditional loan builds debt. For many transportation companies, debt should be avoided whenever possible. Factoring is a debt-free financing option.<\/p>\n In the modern-day, finding a financial organization that cares completely about its customers can be difficult. At Advanced Commercial Capital<\/a>, we break this mold. We aim to serve our customers in every area.<\/p>\n How do we show this? Firstly, we offer non-recourse factoring services, meaning we assume the responsibility of our customers\u2019 invoices \u2013 completely. Secondly, we do not require long-term contracts. Our goal is YOUR good, and we aim to demonstrate our value consistently.<\/p>\n If you are interested in discovering how factoring could impact the health of your transportation company, we would love to get in touch. Reach out to a team member at 855-465-4655 or complete our online contact form<\/a>. We look forward to starting a conversation!3.\tFactoring for Payroll<\/h3>\n
Factoring as a Bank Loan Alternative: 3 Benefits<\/h2>\n
Advanced Commercial Capital: Factors Who Care<\/h2>\n
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