Tag: bank loan

What Are Liens and How Do They Work?

Most of us will have to deal with liens at some point in time or another. If you’re a homeowner with a mortgage, you almost certainly have one now. However, unlike liens associated with homes, some liens can be quite damaging and impact your business’s ability to grow and succeed.

On this page, we’ll dig into how liens work, various types of liens, how they impact you, and what you can do about them if they’re impacting your business.

What is a Lien?

Liens give a company or person legal claims to another person or company’s property. They’re often used when a lender wants to ensure they receive payment from a debtor. It gives the creditor recourse if the debtor doesn’t make good on his agreement to pay.

If you’ve heard the terms “secured debt” and “unsecured debt,” the difference is the lien. Secured debt has a lien and is secured by an asset.

How Does a Lien Work?

Because a lien grants someone else interest in your property, you generally cannot transfer property with a lien to another party without the lien holder’s permission. Liens can also impact your credit score and access to credit.

Beyond this, how it works depends on the type of lien. There are three broad categories: consensual, statutory, and judgment.

Consensual Lien

When you voluntarily agree to a lien, it’s called a “consensual lien.” These are quite common with personal property, such as mortgages and auto loans.

In the case of a home, the property serves as collateral and the lienholder, or mortgage company, has the legal right to liquidate the property if the property owner does not make payments.

Consensual liens are visible on credit reports, but they don’t have a negative impact unless you fail to make your payments.

Statutory Lien

Sometimes a lien is implied by or created by operation of law and does not require your consent. This is a statutory lien.

For example, if you pay a warehouse to store your goods and don’t pay for the storage, the warehouse owner can liquidate your goods or take other actions depending on what your state allows.

Statutory liens reflect negatively on your credit report because they signify an unmet financial obligation and can stay on your report for seven years.

Judgment Lien

Sometimes a court steps in and grants a financial interest in business or personal property, giving lien holder status to a third party. This is referred to as a judgment lien.

This might be the case if someone filed a slip-and-fall lawsuit against your business, the plaintiff won, and your insurance doesn’t cover the full damages awarded. It’s common with car accidents too.

Judgment liens are often considered the most severe and also reflect negatively on your credit. They’ll stay on your credit report for seven years.

Liens and Bankruptcy

Liens against you or your business can impact bankruptcy proceedings because they involve repayment of debt and secured loans.

Many liens can be discharged in bankruptcy, meaning you do not have to pay creditors back. However, government liens, such as tax liens, are usually exempt from this. You’ll be required to pay the debt back even if you file bankruptcy. If you’re unsure whether this or any information outlined on this page applies to you or you have additional questions, be sure to contact an attorney or financial advisor who specializes in liens.

Different Types of Liens

Within each of the three broad lien categories, there is a multitude of lien types. A few of the most common that impact business owners are outlined below.

Bank Lien

Bank liens are a type of consensual lien. They’re put in place when you take out a loan to purchase an asset, such as a vehicle or major equipment. In these cases, ownership and control of the property remain in your hands as long as you make the agreed-upon payments, and the lien is removed when your loan is paid in full.

Real Estate Lien

Real estate liens give a third party the legal right to seize and sell real estate property when a contract is not filled. Most real estate liens are consensual, as is the case with a mortgage. However, some are placed when a creditor is not paid and may be judgment liens instead.

Mechanic’s Lien

Mechanic’s liens are a form of statutory lien. They’re placed when a mechanic or contractor is not paid for work performed and grant the individual financial interest in the business, vehicle, or home in which the work took place.

Tax Lien

Tax liens are another form of statutory lien. They’re often placed by the Internal Revenue Service (IRS) for non-payment of federal taxes but can be placed by any tax authority. Tax liens can impact homes, vehicles, banks accounts, businesses, and business assets. That means if your business owes taxes and a lien has been placed, the IRS has an interest in your receivables too. Therefore, many businesses turn to factoring to finance an IRS lien.

Can a Lien Be Removed?

Liens can be removed in two ways.

1. Contest the Lien in Court and Prove That it’s Invalid

If the lienholder cannot prove that their lien is valid, the court will remove it.

2. Have the Lien Voluntarily Removed

Sometimes lienholders will voluntarily lift a lien or remove restrictions if the lien is impacting your ability to pay them back. You may also be able to negotiate a pay-off amount to clear a lien immediately. However, more often than not, a lien is removed when the related debt is paid off.

Ways to Avoid Liens

Not all liens are “bad” and harm your credit or business, but it’s best to avoid having them placed whenever possible. Thankfully, there are many ways to avoid liens.

Don’t Take on Debt

Pay in cash whenever possible. If you’re experiencing a cash flow shortage or need a quick injection of working capital, look for debt-free ways to get funding such as invoice factoring.

Budget Wisely

Avoid common cash flow mistakes such as focusing on profit over inflows and plan for your slower seasons to ensure you can keep up with payments.

Manage General Contractor Relationships Carefully

Sometimes payments don’t trickle through from general contractors to subcontractors and result in a mechanic’s lien. Vet the payment histories of your general contractors carefully, pay on time and in full. Consider requiring payment bonds from general contractors and/or issuing joint checks that require signatures from all receiving parties. You may also have general contractors collect conditional lien waivers with pay applications. If your state allows it, you can file a notice of completion too.

Boost Your Working Capital with Invoice Factoring

If your business needs a quick cash injection to keep up with payments, you’re trying to pay off debt related to a lien, or you simply don’t want to take on debt, invoice factoring can help. Factoring offers immediate payment on your B2B invoices, so you’re no longer tied into 30, 60, or 90-day waits. To get started, request a complimentary rate quote.

July 23, 2021
10 Common Myths & Misconceptions About Invoice Factoring
“Beware of the half-truth,” as the saying goes. “You may have gotten hold of the wrong half.” While the quote is certainly appropriate in many situations, it hits home a common issue experienced by small businesses looking for business funding. Many “facts” you read are half-truths, and some don’t have a grain of truth to them at all. So, if you’ve been looking for business funding, no doubt you’ve found more than your fair share of “half-truths” about getting funded from invoice factoring as well. Below, we’ll break down ten of the most common myths and misconceptions about invoice factoring, so you can make an informed decision about what’s right for your business.

Myth 1: You can only qualify if you factor all your unpaid invoices.

Many business owners shy away from factoring because they’ve heard that they need to factor all their invoices or all invoices for a specific client. There’s no truth to it at all.

Truth: Each invoice factoring provider is different, but most offer flexible terms.

Generally speaking, factoring companies don’t tie you down. You can factor a single invoice and then never factor again, factor all the time, or anything in between.

Myth 2: You have to pay fees upfront before factoring your invoices.

If you’re facing a cash flow shortfall, paying upfront fees may be totally out of the question and prevent you from seeking funding altogether.

Truth: The fee is covered when your customer pays their invoice.

When you work with an experienced factoring company that’s dedicated to service like Charter Capital is, you don’t pay any upfront fees. Instead, you receive most of the invoice’s value as an advance. A nominal fee for the service is taken when your customer pays its invoice, and the remaining portion is sent to you. That means you’re never out-of-pocket anything under a typical arrangement.

Myth 3: Factoring companies delay the collection process to maximize their fee income.

Think of it this way: the factoring company only thrives when your business is successful. The more you can put into your business and the more you grow, the more they stand to make by retaining you as a client. It’s in the factoring company’s best interest to minimize collection delays and keep you well funded.

Truth: Factoring companies accelerate payments.

Oftentimes, factoring companies go above and beyond to accelerate payments by making it easy for your clients to pay and helping you manage your back-office processes more efficiently.

Myth 4: Using an accounts receivable financing or factoring company is more expensive than traditional bank financing.

True, factoring companies may cost more than conventional bank financing. However, funding from invoice factoring is designed to give you much greater financial leverage than you could ever gain from a conventional banking relationship. The amount you pay for invoice factoring is typically based on the level of service you require from the factoring company in order to meet your business needs.

Truth: Factoring is an affordable source of business funding.

At Charter Capital, some of our factoring rates are as low as one percent. However, if cost is your primary concern, it’s best to start with a complimentary rate quote.

Myth 5: Customers might leave if they see you partner with a factoring company.

Small businesses are built on relationships, so, understandably, many business owners would worry about perception. Thankfully, that’s rarely a concern with factoring. Particularly in this day and age in which your business customers are accustomed to third parties like factoring companies performing treasury management services for their vendors, like you.

Truth: Customer invoices are managed much the same way you would with a bent on helping you provide better customer service.

Streamlined billing and more generous payment terms to your customers are seen as a benefit by customers. Moreover, businesses that leverage factoring are able to offer more flexible payment terms and can often take on more work, which leads to better service overall.

Myth 6: I won’t qualify for factoring because of my credit history.

Most forms of business lending have stringent requirements related to your credit history, time in business, and cash flow. Factoring is different.

Truth: The creditworthiness of the business paying the invoice is the primary consideration. Most business owners qualify.

When you work with a factoring company, they’ll look into the creditworthiness of any customers whose invoices you wish to factor and then determine if that business is creditworthy and how much credit can be reasonably extended.

Myth 7: Factoring invoices means you lose control of your company.

Given the way approval works, business owners sometimes take a leap and assume that factoring means they can’t choose who to work with or which jobs to accept.

Truth: Invoice financing can give you more control over your company by helping you stabilize your cash flow.

For argument’s sake, let’s say your factoring company tells you that one of your clients doesn’t have strong enough credit for their invoices to be factored. You can still accept work or orders from them. You simply might not be able to factor those particular invoices. But, that would mean you’re extending credit to a high-risk customer—someone you know may not be able to pay. Most business owners wouldn’t do that unless under extenuating circumstances. Some factoring companies like Charter Capital will go out of their way to understand the extenuating circumstances and arrange to accommodate your funding needs accordingly.

At the same time, factoring stabilizes your income. You’re less likely to have customers who can’t pay, and your income becomes far more predictable. That leads to easier budgeting and provides an edge when you’re strategizing your next business move.

Myth 8: Receivables factoring is only for struggling businesses.

One of the biggest benefits to factoring is that it provides business funding when a business would otherwise be denied a bank loan. You can qualify with bad credit, a short credit history, or even if your existing debts or excessive growth prevent you from qualifying for the loan you need. That sometimes leads people to believe that only companies in financial distress use factoring.

Industries with lengthy payment cycles, like oil and gas, often turn to factoring to maintain steady cash flow. Oilfield factoring enables oil and gas service companies to convert their unpaid invoices into immediate cash. This not only helps them cover operational expenses but also positions them for growth in a competitive market.

Truth: New companies and SMEs often use invoice factoring too.

According to the annual Small Business Credit Survey, a whopping 30 percent of businesses with financial needs don’t even bother applying for loans because they’re debt-averse, don’t think they’ll qualify, or for other reasons. Of those who apply and qualify, only about half receive the amount of funding they need. In addition, high-interest rates, unfavorable repayment terms, and insufficient funding amounts cause 20 percent to walk away from loans on their own.

While it may be true that it’s notoriously difficult to get a bank loan, these figures signify that about half of all financially sound companies still can’t get the funding they need—cash for growth, expansion, and everyday expenses.

Myth 9: It can take too long to see the benefits of factoring.

People who don’t understand how factoring works or how to leverage it properly sometimes think it’s a lengthy process because the business factoring needs to be approved, and the company paying the invoice needs a credit check before cash is disbursed.

Truth: Factoring is designed to help with short-term cash flow issues.

First, it’s important to note that the steps outlined above—approval, credit check, and payment—all happen very quickly when you work with an experienced factoring company and you have basic business documents ready. From start to finish, everything can be completed in a couple of days. When you work with a company like Charter Capital, you can get same day funding on the day you submit your invoice too. None of this is possible with traditional bank loans.

Secondly, factoring is designed to help with short-term cash flow issues. It’s a cash flow accelerant that reduces the time between completing work or delivering goods and getting paid.

Myth 10: Other business lines of credit or traditional bank loans are better.

Business lines of credit and bank loans are very different from factoring, so the benefits and use cases will be different too. Bank loan rates will often be lower, but traditional banks leave a major funding gap that factoring fills. Plus, factoring helps in ways that banks can’t or don’t.

Truth: Factoring is a better solution for many small and midsize businesses.

Factoring may be the better solution for you if you:
- Need fast approval.
- Want same-day cash.
- Need flexibility
- Won’t qualify for a bank loan.
- Are a fast growing company and need greater financial leverage/ funding than a traditional lender can approve.
- Don’t want to take on debt.
- Appreciate a streamlined back-office solution.
Work with the Best Factoring Company: Charter Capital

With decades in the industry, fast approval, and same-day funding, Charter Capital can get your business the cash it needs through invoice factoring. Request a free rate quote now.
May 14, 2021
QuickPay vs Factoring: What’s the Difference?
Creating consistent cash flow as a carrier in the trucking industry is a complex and often challenging task. As an experienced trucker, you’re familiar with the routine: you complete a job by moving a load, then immediately have expenses such as fuel, vehicle maintenance, insurance, and various other operational costs. These expenses accumulate steadily while you’re out on the road. Often, amidst the hectic schedule of a truck driver, it might take several days before you can sit down to process and send out an invoice for the job you’ve just completed. Once the invoice is sent, the waiting game begins. You might find yourself in a position where you’re waiting 30, 60, or even more than 90 days to receive payment for your services. This delay in payment can create significant financial strain and uncertainty, particularly for small or independent trucking companies.

Given these challenges, it’s not uncommon for carriers to start exploring different financial solutions. Many truck drivers and trucking companies begin to consider options like bank loans or alternative methods to accelerate the receipt of load payments. This is where the concepts of freight factoring and the quickpay option often come into the discussion. However, understanding the nuances of these financial tools and determining which one is most suitable for your specific needs can be daunting.

At Charter Capital, we understand these challenges, which is why we offer both freight factoring and quickpay options to our clients. Our goal is to provide truckers and trucking companies with viable financial solutions that align with their unique business needs and cash flow requirements. We believe in full transparency and have no interest in pushing one option over the other. Our primary concern is ensuring that you, as a carrier, find the most effective financial solution to maintain and grow your business. Below, we will delve into both freight factoring and quickpay, helping you make an informed decision that best suits your trucking business.

What is QuickPay in the Trucking Industry?

Quickpay is a cash flow accelerant that some brokers offer. Instead of waiting for an extended period for payment, the broker offers cash advances to carriers through a process known as Quick pay. This system allows carriers to receive funds in exchange for a discount on the total invoice amount. The discount percentage can vary, typically ranging between one and five percent of the full invoice value. Plus, the timeframe for receiving these payments also differs among brokers. While some offer same-day funding, making quick pay an attractive option for immediate cash flow needs, others might take several days to a week or more to process your payment.

Quick pay for truckers is especially beneficial, as it provides them with the financial flexibility they need to maintain operations without the burden of waiting for delayed payments. This system is crucial because many brokers themselves face cash flow challenges. They often find themselves in a predicament, waiting for shippers to settle their dues while simultaneously needing to cover the unpaid invoices from carriers. Charter Capital’s Quick Pay services are designed to bridge this gap effectively. By using Qquickp Pay, truckers can get paid within a much shorter timeframe, alleviating the financial stress associated with delayed payments and helping them manage their cash flow more efficiently. This service offers a practical solution for truckers to maintain their financial stability and focus on their core business activities without the worry of prolonged payment delays. We offer factoring services for freight brokers and can quickpay their carriers.

Benefits of Quickpay
- Speeds up your cash flow by offering a payment option that covers operating expenses more efficiently.
Drawbacks of Quickpay
- Some brokers only offer it, so if you rely on it, you might wind up accepting low-paying loads to ensure you can work with a broker who does.
- The percentage fee will vary, which may make it hard to predict expenses.
- The fees can add up, cutting into your income.
- The broker knows you’re tight on cash and may try to negotiate for lower rates.
How Does Invoice Factoring Work?

Recourse and non-recourse factoring are cash flow accelerants that factoring companies offer. This is a one-on-one relationship in which the factoring company purchases your invoice at a slight discount, provides you with immediate payment, and then collects payment from the broker. Like quickpay, the rate varies anywhere from about one to five percent of the invoice’s value. You can also generally choose between getting paid right away or waiting a few days.

With non-recourse factoring, you won’t be on the hook for paying the balance back if the broker doesn’t pay. With recourse factoring, you could be. However, this is rare because factoring companies perform credit checks on the brokers to determine their creditworthiness before an invoice is accepted. If a particular broker’s invoices don’t qualify, it’s likely because their ability to pay is in question. That helps you weed out potential non-payers too.

Benefits of Factoring
- Your cash flow is much faster. You can receive cash within 24 hours.
- Can potentially work with every broker you move loads for.
- Allows you to choose which invoices you get advances on.
- Relieves you of managing your accounts receivables.
- Helps you gauge the creditworthiness of brokers.
- May come with perks like fuel cards.
Drawbacks of Factoring
- It is generally slightly more expensive than quick pay fees due to the additional services provided, but you can shop around for a good rate.
Charter Capital Offers Additional Benefits

If you’re considering accounts receivable factoring for trucking, Charter Capital can help you even more. We offer:
- The highest advance rates in the industry.
- No application fee or hidden fees.
- A streamlined application process with very little paperwork and fast approval.
- Dedicated account managers who care about your success.
- Comprehensive reporting.
Get a Complimentary Quote

Quickpay is a good option when you need fast payment after a load, but if your broker doesn’t offer it, you appreciate the additional benefits associated with factoring, or you want to see if you can get a lower rate by factoring, you owe it to yourself to find out more. Get started with a complimentary quote from Charter Capital.
March 8, 2021