| You suddenly find that your business is in a cash | | | | client, outlining the proposed advance rate (typically |
| squeeze. You started your small trucking company | | | | 80%-90% of the invoice), and fee structure (usually |
| with five units and a lot of industry experience. | | | | from 2%-3% per month depending on several |
| Things started out well, with revenues per mile on an | | | | factors)o Upon acceptance of the terms, a formal |
| upward trend, and an addition of two units the first | | | | contract is executedo Initial funding can occur within |
| year. But the expense pressure of higher fuel costs, | | | | 3-5 days |
| driver settlements, permits, insurance, and repairs | | | | BENEFITS OF FACTORINGo Professional collections - |
| have begun taking its toll. Add to the mix some | | | | Not only will a good factor collect receivablesin a |
| uncollectable accounts and your margins begin to | | | | professional manner, but he will eliminate overhead |
| suffer. | | | | associated withthe collection process which free up |
| Tightening cash flow even further is the credit you | | | | your time to run your business.o Compliance - a |
| are extending to your customers. Take a look at | | | | factor that specializes in trucking can provide tools |
| your accounts receivable aging schedule and you'll | | | | that greatly diminishes the time needed for complying |
| likely see many accounts over 30 days. You are not | | | | with what seems like an endless list of government |
| getting paid for delivering your end of the deal in a | | | | rules and regulationso Fuel Card - accepted wherever |
| timely manner and as a result, you are providing the | | | | Fleet One cards are accepted. The factoring facility |
| use of your money to your customer for free. | | | | can be "loaded" on the card and ATM access and the |
| Unfortunately, you can't defer payroll, fuel, and other | | | | ability to write checks are definite advantageso |
| expenses for thirty or more days. | | | | Unlimited capital - Factoring is the only source of |
| Should you adopt a COD payment policy? How about | | | | financing that growswith your sales. As sales |
| adding a service charge to all accounts over 30 days | | | | increase, more cash becomes available for youto use, |
| and vehemently sticking to it? Neither of these | | | | which allows you to constantly meet demando Take |
| solutions is advisable, because you will probably lose | | | | advantage of volume and early payment discounts - |
| customers right and left. You are in a highly | | | | Withimproved cash flow, you will be in a position to |
| competitive industry and other companies would | | | | take advantage of thesediscounts which directly |
| jump at the chance to acquire new customers by | | | | effects your bottom lineo No debt incurred - |
| offering them the credit that you won't. | | | | Factoring is NOT a loan and therefore, you are |
| There is a service that can provide a safety net for | | | | notincurring any debt. This keeps your balance sheet |
| your company and allows you to convert freight bills | | | | looking good, therebymaking it easier to obtain other |
| into instant cash flow within 24 hours. Better yet, this | | | | types of financing or to sell thecompanyo Choose |
| service only costs pennies on the dollar. This service | | | | the invoices you wish to factoro Factoring is quick |
| is called invoice factoring. | | | | and easy - Unlike applying for a loan, there are no |
| Although not widely known among entrepreneurs, | | | | extensive documentation requirements and funding |
| factoring has been a useful financing tool for | | | | can occur in days, not weekso Credit Screening - |
| centuries. Manufacturers, distributors, service | | | | Professional factors can provide credit investigations |
| providers (such as trucking companies) use factoring | | | | for new and existing customers, which will likely lower |
| to stabilize their cash flow. In 2005, factoring volume | | | | your bad debt charge-offso No personal guarantees - |
| exceeded $112 billion, and has grown every year | | | | The company principals do not have to guarantee |
| since 1984. | | | | the repayment of the funding (only against fraud or |
| Factoring is the purchase of a company's accounts | | | | disputes) |
| receivable at a discount. The process is simple:o Fill | | | | Imagine a scenario where you have the time to |
| out a simple application and include an receivables | | | | devote to developing new business and running your |
| aging reporto Factoring company reviews the | | | | operation more efficiently, rather than worrying how |
| application and determines credit worthiness of the | | | | you're going to pay your bills on time. |
| client's customerso Letter of intent is given to the | | | | |