Accounts Receivable Financing And The Trucking Industry

by : Kris Koonar

Many owners of trucking companies often face a very tricky situation. They will have clients who do not pay their invoice before the credit period of 30 to 60 days, while at the same time being in constant need of finance to pay off different expenses. Truck driver's wages, fuel, and maintenance expenses are areas of immediate financial requirements. Lack of timely payments mean a lack of cash for immediate expenses. Banks may not be able to give quick loans for different reasons. So how do companies meet these expenses? The solution lies in the accounts receivable finance that factoring companies and other financial institutions are ready to provide.

Depending on the financial standing of the clients and the overall rating of the clients, finance companies provide trucking companies with the necessary amount of finance against their accounts receivables. The truck factoring companies buys these accounts receivables and a certain percentage of cash is paid to the clients, which may be up to 90% of the invoice value. These accounts receivables should not be pledged as collateral with any other financial institution. The entire process may take even less than 5 days.

Moreover, by availing finance against the sales of these accounts receivables trucking companies can go ahead with their expenses as well as focus on the growth of their businesses. This amount is not to be repaid. It is not a loan of any sort, and will be discussed further down.

The major advantage is that a trucking company can increase their client base when they have a clear financial record. They can also bid for larger projects. This is the growth opportunity that they can easily take without the worry of a lack of funds. The timely finance that these companies offer provides a major boost for growth. Opportunity need not be lost due to a loan not sanctioned on time. The assets in receivables are converted into cash when the need arises. As the business grows the invoices also increase, and there are more assets that you can factor. It is better than a loan, which shows badly on your balance sheet; you have assets and cash flows that speak of a better financial situation.

The percentage of finance given depends upon the credit standing of your clients and not on your credit rating. Any trucking company with credit worthy shippers or freight brokers is eligible for financing. This way factoring companies can even assist you in selecting clients that have good credit ratings. Moreover the collection is taken care of by these companies, so you need not worry about the collection aspect.

All the collection activities like reminders and visits are taken care of by the factoring company, which lets you focus on the maintenance and growth needs of your trucking business. In addition these companies can help you bring discipline to your accounts procedures and overall finances. They provide you with free credit analysis and reports and accounts receivables statements. Financing fees are not high and may be a percentage of the accounts receivables amounts and other criteria.

Many trucking companies are finding this highly beneficial and are opting for the accounts receivable financing process to grow their business. Even a startup company is welcome to these financial organizations.