The Canadian transportation industry has been a source of growth for many years. The industry has provided numerous opportunities for entrepreneurs who want to start their own companies. A lot of this business activity has been focused in areas like Quebec, Ontario and near the oil sands, where oilfield transportation companies are flourishing.
Small companies run into financial problems
However, these companies can easily run into financial problems as they are often started by individuals who often have a lot of experience, but little capital. The most common problem stems from that fact that many shippers do not offer quick pays. Instead, they pay slowly, and can take up to 60 days to pay an invoice.
This can create problems for carriers that are not well capitalized. Carriers have a number of ongoing expenses – drivers, fuel, repairs – that must be paid regularly. And if cash is tight, it’s fairly easy for a company to run into problems.
However, these problems can easily by fixed by financing your freight bills
Improve cash flow with freight factoring
Freight factoring provides many of the cash flow benefits that you would get if your clients paid quickly, but without requiring them to pay faster. It works by financing your freight bills through a factor. The factoring company provides you with an advance on your slow paying invoices and holds the receivable as collateral. This gives you immediate funds that can be used to pay drivers and grow your business. The transaction settles when your shippers pay the invoice in full.
How does it work?
The transaction is relatively simple. Most factors finance your invoices in two payments, known as the advance and the rebate. The advance is wired to your bank account or fuel card account as soon as the load has been received and accepted by the client. The advance usually covers 90% of the gross value of the bill, though this varies.
The remaining 10% is rebated once your shipper or commercial client pays the bill in full. The fee is often discounted from this payment. Fees often range from 1.5% to 3.5% per 30 days.
One advantage of using freight bill factoring is that you will not longer have to depend on clients that use quick pays. Not only does this give you improved control over your cash flow, it can help you grow your company. You’ll be able to take on more clients without worrying about slow paying receivables. You can always finance a bill if you need funds.
Do you qualify?
Since the factor is financing your receivables, your invoices must be of high quality. This means that your shippers must have good credit, your paperwork must be correct and your billing processes must be efficient. Also, your receivables should not be pledged as collateral for another type of funding.
Most small and growing transportation companies should be able to qualify for this program. The application requirements are fairly simple and getting started just takes 5 to 10 days.
Will this solution help my transportation company?
Factoring you freight bills will help your transportation company if your biggest financial issue is slow payments. It will provide you with improved cash flow and a solid financial base that can be used to grow your company.
Get more information
Are you looking for freight factoring? We are a leading company in Canada and can provide high advances at low rates. For information, get an online quote or call (877) 300 3258.