| In the midst of the credit crunch, companies in many | | | | thorough credit checks on all the main customers and |
| different industries are discovering the potential | | | | follow up until invoices are paid. This is a valuable |
| benefits of factoring their accounts receivable. | | | | service that prevents collection problems and bad |
| There's at least one industry, however, for which | | | | debt for trucking companies. In fact, some owners |
| factoring isn't necessarily breaking news: trucking. | | | | feel that this service alone justifies the cost of |
| Trucking companies have been taking advantage of | | | | factoring services. |
| the benefits of factoring services for years. | | | | The factoring process is simple: A commercial finance |
| The biggest challenge facing new and growing | | | | company, or "factor," purchases invoices from the |
| trucking companies has always been managing cash | | | | trucking company as soon as there is an attached Bill |
| flow. How do you make sure that the money coming | | | | of Lading. This way, the company always has enough |
| in matches the money going out? For the owners of | | | | cash to pay its bills on time or even early, which |
| most trucking companies, this is their biggest | | | | enables owners to negotiate "early pay discounts" to |
| challenge. | | | | help offset the factoring service fees. Just as |
| Factoring Services: A Reliable Alternative | | | | importantly, the owner can focus on more important |
| Most business owners rely on bank lines of credit to | | | | business issues like sales and profitability, instead of |
| provide them with the cash they need until they | | | | collecting accounts receivable. |
| actually get paid. This can create a dangerous | | | | Handing Off Collections |
| situation, however, as lines of credit are more difficult | | | | The president of a trucking company in New |
| to come by today. Many companies that do have | | | | Brunswick has been factoring accounts receivable |
| credit lines are seeing them cancelled or reduced by | | | | since 2007. "Our commercial finance company handles |
| banks with little or no explanation or warning. | | | | the day to day work of collecting our receivables," |
| While banks can provide trucking companies with lines | | | | he says. "They do all the work and the only time we |
| of credit, the companies have to establish a history | | | | hear from them is when there is a problem. We like |
| of profitability. Also, the bank will look at the | | | | that." |
| company's profits as the first source of repayment, | | | | Before new customers are added, the commercial |
| then to the equity or net worth of the business, and | | | | finance company first checks their credit. "This has |
| then to liquidation of the owner's assets, particularly | | | | helped us avoid potential problem accounts on several |
| real estate. | | | | occasions," the president says. "The best part is that |
| Many trucking companies have discovered that | | | | we can now control our own cash flow. We decide |
| factoring is a reliable and effective alternative to | | | | when to submit our invoices and the commercial |
| bank lines of credit for financing their working capital | | | | finance company turns them into cash; that's a lot |
| shortfalls. In fact, many "bankable" trucking | | | | better than waiting for our customers to pay us." |
| companies are choosing factoring services even if | | | | Utilizing factoring services has helped this trucking |
| they qualify for bank credit lines. | | | | company grow tremendously despite the rough |
| Factoring services are common in the trucking | | | | economy. "By utilizing factoring services, we have |
| industry because qualification depends mostly on the | | | | been able to triple our growth in the last 24 months |
| trucking company's customers. A factor will conduct | | | | and still maintain positive cash flow. |