Tag: invoice factoring

Invoice Factoring is a when a business sells its accounts receivable to a third party at a discount.

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
How Invoice Factoring Can Help You Expand Your Business

Invoice factoring or accounts receivable financing is often leveraged by small businesses as a way to get the working capital necessary for expansion. However, if you haven’t heard of the concept before, you’re missing out on all the benefits a factoring company can offer. Below, we’ll break down the basics, so it’s easier to see if invoice factoring is the right tool to help your business grow.

Why Invoice Factoring Matters

Each working capital solution is appropriate for specific situations, and invoice factoring is no different in this respect.

Best for Small Businesses That Need Cash Fast

Most working capital sources take weeks or months to process and approve your application. With invoice factoring, you get fast cash. Small businesses can usually get cash within a couple of days or even on the same day if they’re working with a factoring company like Charter Capital.

Best for Startups Expanding Their New Businesses

Startups normally have a very difficult time qualifying for financing because they haven’t been in business long. Time in business is not a major factor in qualifying for invoice factoring, so it’s much easier to get approved.

Best for Business Owners with Low Credit Scores

When faced with denials on a business level, many small-business owners turn to their personal scores and creditworthiness to get business funding. However, roughly 39 percent of small-business owners qualify as “credit ghosts” according to the Miami Valley Small Business Development Center. That means their personal credit score is 620 or lower and they have a limited credit history or no history at all. It’s all but impossible to qualify for traditional financing with this background.

The problem is further compounded by the very steps business owners often take in light of their credit woes and capital shortcomings. A full 51 percent of successful entrepreneurs have willingly denied themselves a paycheck to keep their business afloat, per a Business News Daily report. More than a quarter held off on their own pay for two to six months, while an almost equal portion went six months without an income. Meanwhile, CNBC reports that 21 percent use their personal savings. These things essentially lock in their status as credit ghosts, creating a cycle that drains their personal reserves and diminishes their personal creditworthiness even more.

However, invoice factoring doesn’t rely on personal credit and allows business owners to tap into cash without using their personal savings or trapping them in debt. This makes it easier to qualify and gives the business owner a leg up in establishing good credit, a twofold solution to this common business problem.

Why Would a Business Use Factoring?

Businesses use factoring to address a multitude of situations.

Cash for Expansion

Sometimes companies use their invoices to get the cash they need to purchase another location, tap into a new market, or expand in other ways.

Payroll and Other Daily Operational Expenses

Because payroll is often the greatest expense for small businesses, organizations often use their invoice advances to cover it and ensure their teams and employees are paid on time, even if customers aren’t paying in a timely manner. For example, staffing factoring is frequently used by staffing agencies to maintain steady payroll funding without waiting for client payments.

PPE

Businesses today are coping with a major unexpected expense—personal protective equipment (PPE). Although most don’t have a budget for purchasing things like masks, or even extra disinfectant, they’ve fast become a mandatory business expense.

Inventory and Supplies

Virtually all businesses must purchase goods from suppliers, including raw materials which are turned into an end product ready for sale or supplies, like fuel and printer paper. You can tap into your unpaid invoices to get cash for any of these vital purchases.

Equipment

From manufacturing equipment to trucks and tires or even office computers, invoice advances can supply the funds and provide a good financing option.

Paying Off Debts

Most business funding options rely on debt—you borrow money and then pay it back with fees and interest. When you’re working with a factoring company, there’s no debt to pay back, so it can be a good way to pay off high-interest loans or other debts with excessive fees.

Marketing

We talk about the importance of marketing in Top 7 Reasons Why Startups Fail. Suffice it to say, it’s important to keep up with your marketing efforts if you want your company to grow. Many organizations use the cash tied up in their invoices to enhance their marketing efforts, so they can build a healthier business.

Securing Better Deals or More Work

Oftentimes, vendors will offer better deals to companies that place larger orders or pay in advance, but you’ll need to have working capital at the ready to lock in a deal. Leverage invoice factoring for a quick cash flow injection.

Offering Better Payment Terms to Win More Business

When you know that you’re going to get paid promptly regardless of how long the customer takes, you’re free to provide better terms, such as a more competitive bid or a longer repayment term. Factoring will allow you to do this, so you can improve customer satisfaction and win more business.

How Invoice Factoring is Being Used to Improve Cash Flow

What are the benefits of invoice factoring? Invoice factoring works by providing you with an instant cash payout for your outstanding invoices. It shortens the length of time between performing work or delivering goods and getting paid for your efforts. That way, your cash flow is consistent, and your business operations aren’t held back by slow-paying customers.

Small Business Can Use Invoice Factoring as an Alternative Financing Option to Loans

Small business factoring is an ideal alternative to business lending in many situations, particularly when cash advances are required quickly. As demonstrated earlier, it works when businesses or business owners don’t qualify for traditional small business loans. However, it’s also beneficial when the organization simply doesn’t want to take on more debt. That might be true if you’re trying to build your credit in advance of a loan application or are trying to minimize your debt ratio for other reasons.

One of the primary benefits of invoice factoring is its flexibility across various industries. For example, security factoring helps security guard firms maintain stable cash flow to cover payroll and operational costs, allowing them to focus on providing top-notch security services without the financial strain of waiting for customer payments. This industry-specific approach demonstrates how factoring can be adapted to meet the unique needs of growing businesses.

What Are the Disadvantages of Invoice Factoring?

With so many benefits to invoice advances, it might be hard to see the downside. However, it’s worth noting that it’s not right for every situation.

You Must Submit Each Invoice to the Factoring Company to Obtain Funding

When you work with a factoring company, it’s usually up to you to decide which unpaid customer invoices to factor and when to factor them. That’s usually a good thing because it means you can process all your other invoices as you normally would and only leverage factoring when you have immediate cash needs or when you know a client will pay slowly. However, the flip side of this is that, to obtain funding, you do need to send your factoring company each invoice you want to factor.

Your Factoring Company Will Have Contact with Your Customers

The factoring company has the right to communicate with your customers to collect the invoices and to make sure all is OK. Most organizations are familiar with third parties in billing, so it’s generally not an issue, but it is worth mentioning. Make sure that when you select a factoring company, you choose one that is known for its customer service and its ability to work with you and your customers.

How Much Does Factoring Invoices Cost?

We dig into the cost of factoring a bit more on our website, but the short version is that it depends on things like the volume of invoices being factored, the total value of factored invoices on a monthly basis, and how long it takes your customers to pay. Charter Capital prides itself on offering some of the most competitive rates in the industry, with some factoring fees as low as one percent.

Get a Complimentary Rate Quote

If you think invoice factoring might be right for your small business, start with a complimentary rate quote from Charter Capital.

April 9, 2021
How to Finance an IRS Business Lien by Factoring

Already have an IRS business lien or worried the government will file one? Often the result of unpaid payroll taxes or other tax issues, liens can stall business growth and make it much harder to pay debts no matter how diligent or dedicated you are. We’ll break down what business tax liens are, why they happen, and how invoice factoring can help below.

What is a Business Tax Lien?

When the government determines that a business taxpayer owes and has concerns it won’t pay, one of the tools in its arsenal is to have a lien placed on the business and its assets.

If you’re a property owner with a mortgage, you probably already have a lien against your property. In these situations, your mortgage company will file a lien when they fund your purchase. The lien indicates the bank or lender is prioritized over other creditors where the property is concerned and grants it certain rights. For example, the bank gets the first claim on funds when you sell your home. The lien also allows the bank to act if you don’t make good on your payments, which can include seizing the property after certain processes are followed.

An IRS business lien works similarly. It’s the IRS’s way of saying the agency is prioritized over other creditors where your business is concerned and grants it certain legal rights. However, it’s not limited to just the business property. It covers all the company’s assets from the equipment through accounts receivables.

A federal tax lien is a legal claim that attaches to your business’s property, including any real or personal property, and becomes a matter of public record, which can severely damage your business credit and limit your ability to get new credit or sell the business.

When Does the IRS File a Business Lien?

The IRS does not generally file a lien right away, even with delinquent taxes. The agency has a process it follows that involves trying to work with you and get you on a payment plan before moving forward with a lien. Your best opportunity to correct the problem is during this window before a lien is placed. However, if you don’t comply or can’t meet the agency’s demands, and the IRS notifies you that a lien is being filed, you still have options.

Once the IRS files a public notice of lien, the lien attaches to all current and future business assets. If you’ve already paid or resolved the tax debt, you may be able to request a lien release using Form 12277.

How Does a Tax Lien Affect Your Credit?

On one hand, a lien means you can’t readily sell business assets. Unless specific steps are taken, the government’s claim to an asset remains even after it’s sold. This means that the government can still seize the asset regardless of who possesses it, even though the other party is not responsible for the debt.

This alone excludes you from asset-based lending options. Your receivables are considered assets, and the government is first in line for them. They can’t be used as collateral because the IRS would get them first.

Additionally, these types of liens raise red flags that other liens, like the one on your home, don’t. They signify financial distress. So, you probably won’t qualify for traditional bank loans either. It’s too risky for the finance company as it will have no recourse if you default because, again, the IRS comes first.

It’s also worth noting that IRS liens may stay in place even if the business files bankruptcy, so small business owners often prioritize paying the agency when push comes to shove. If a lender is willing to extend credit despite this, the fees charged are likely to be much higher than normal to compensate for the additional risk.

How Factoring Can Solve Business Tax Problems

Tax professionals can help you strategize and negotiate with the IRS, so it’s a good idea to consult with a specialist if you’re struggling. However, one solution they routinely recommend is factoring.

Think of invoice factoring like a cash advance on your unpaid B2B invoices or a form of receivable financing. It eliminates the wait for payment and gives you a quick injection of working capital. With that in mind, factoring can help you during the window before a lien is filed and assist you after too.

For example, let’s say the IRS sends you a notice of federal tax lien—a final notice explaining that you have ten days to pay off your balance or get it below $25,000 or it intends to file a lien. You’d love to, but your customers aren’t going to pay you for at least 30 days, and there’s no way you’re getting a traditional bank loan within ten days. You simply go to a factoring company and request an advance, then pay the IRS immediately. You’ve now avoided the lien entirely and are free to move forward.

Or, let’s say the IRS has already filed a lien, and your business is struggling. You’ve got payments to make to the agency and overhead to cover. You’re working as hard as you can, but cash flow is sluggish. At this stage, a factoring company can’t just jump in because the IRS now has first place on your customer invoices. However, IRS may consider subordination. Suppose you can demonstrate that the lien is damaging your ability to repay and demonstrate how factoring will help. In that case, the IRS may agree to take second place on your receivables and allow the factoring company to come in first place. Sometimes, the factoring company can even make payments directly to the IRS, alleviating any concerns it may have about non-payment. With the cash advances you receive, you can pay the IRS and level up your business by adding in more staff, purchasing materials and equipment, or accepting more work, so you can get your tax issues taken care of even faster and have a healthier business in the long run.

It’s also worth noting that the approval process for factoring is fast and easy compared to business loans. Even if your credit history isn’t great because of IRS issues or payment history, you can still qualify because factoring companies are more concerned with your customer’s ability to pay their invoice than your credit score.

What is the Invoice Factoring Process?

Factoring is simple. You simply choose which B2B invoices you’d like advances on and submit them to the factoring company. The factoring company then provides immediate payment for a portion of the invoiced amount—usually 80 to 90 percent of the invoice’s value (even higher for some industries) —and then waits for your customer to pay. When the final payment comes in, the factoring company sends you the remaining amount, minus a nominal fee for the service.

What Kind of Industries Benefit Most from Using a Factoring Company?

Factoring works for all kinds of businesses in the B2B sector. Businesses that leverage it most tend to be those with lengthier invoicing terms, those with seasonal shifts or other issues that contribute to cash flow problems, and those with significant expenses before completing an order or work that need to be covered to keep generating revenue. For businesses managing tax liabilities or dealing with financial obligations like IRS liens, factoring can offer a clear path to maintaining operations while reducing the impact of money owed.

Trucking & Freight Services

Factoring is a favorite for the trucking industry because trucking companies typically must pay their drivers in advance of receiving payment for their invoices. Also, carriers have fuel and equipment-related expenses that must be covered before drivers can hit the road. It can take months after a load is complete before payment is made. Factoring companies that serve trucking and freight businesses can provide payment as soon as a load is complete, so the business can cover the cost of taking on the next load. At Charter Capital, we also provide perks like fuel cards for trucking companies, so they save even more money.

Freight Brokers

Freight brokers are in a similar situation. They’re waiting for shippers to pay, but they need to get carriers paid promptly, or they may stop accepting work. With factoring for freight brokers, the factoring company pays the invoice right away and can even send cash directly to the broker or carrier as part of a QuickPay program.

Staffing

Staffing companies find talented people, vet them, and place them. When you add the time for invoicing and waiting on payment, months can pass before the company sees a return on their investment. With staffing factoring, when a staffing company chooses this method, they get paid right away, so they can keep searching for talent and pay employees promptly. Many also appreciate that factoring relieves them of the collections process, so they’re free to focus on the business.

Manufacturing

Oftentimes, manufacturing companies use factoring to cover the contract’s initial expenses, like purchasing supplies and equipment. However, many use it to speed cash flow during slow periods and cover operating costs like payroll.

Security Firms

Similar to staffing companies, factoring helps security firms find talent and cover payroll. Both may use their factoring cash to fund acquisitions and negotiate discounts with suppliers too.

Oil & Gas Services

Companies in oil and gas use oilfield factoring for a wide variety of things. Because they often support large corporations that can take ages to pay, the streamlined receivables process allows them to cover their daily expenses, grow, and position themselves more competitively.

Consulting & Service Firms

Like many of the others outlined here, consulting and service firms choose factoring to cope with delays between the output of their expenses and final payment from a customer. They often put the advances to work, covering recurring expenses, growth, marketing, and getting debts paid off.

Solve Your IRS Issues with Factoring

As a leading factoring company with experience helping businesses cope with their IRS troubles, Charter Capital can walk you through the process and your factoring options. To kick off the process, request a free quote.

Disclaimer: The author of this article, Charter Capital, and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

March 17, 2021
Five Ways Invoice Factoring Services Can Help Grow Your Business

Cash flow problems are one of the main reasons that many small businesses fail. A factoring company like Charter Capital can potentially provide you with upfront cash for every single unpaid invoice. We act as an outsourced credit department, handling the collection and processing of payments for invoices, enabling you to grow your business without the stress of having to manage your cash flow.

1. Getting started

If you’re running a startup, you’re probably fully aware of how difficult cash flow can be. Oftentimes, it seems like just when things get going, you’re already out of cash. The best factoring companies can help your business fill the cash flow gap as you get started by offering quick and reliable funding for your unpaid invoices. Charter Capital’s invoice factoring services can help your company fill the cash flow gap as you get started. During this stage, it’s helpful to work with a factor that understands your needs. For instance, accounts receivable factoring companies specializing in service businesses will be more familiar with the types of terms that janitorial, consulting, accounting, staffing, and other service-based businesses offer, so you’re more likely to get the level of support you need.

2. Keeping your company going

Once your company is up and running, it is likely that you will still experience ongoing challenges with cash flow. Your invoices might begin to pile up, remaining unpaid for 60 to 90 days, sometimes even longer. Trying to continue your business with the lack of revenue from outstanding invoices can significantly deplete your cash flow. Working with a factoring company can immediately boost your cash so you can keep your business going. For many companies, there is a significant amount of capital tied up in accounts receivable. Using invoice factoring will free up these assets and convert them into immediate cash for your growing business.

3. Lowering warehouse management costs

Factoring enables businesses to get cash before their invoices even collect, which can be used to increase their inventory, for example. Businesses can receive a significant discount rate when buying inventory in large quantities, and these savings often outweigh the costs of invoice and accounts receivable factoring. The cash from factoring can be used to prepay your vendors or pay vendors COD, giving you the flexibility to negotiate price reductions or even invoice discounts for prompt payment. You can also use the cash to reduce the incoming costs of freight shipments by prepaying the freight company.
Factoring will improve your purchasing department’s position with vendors, as prompt payment gives your company a positive payment history. A decent payment reputation enables your company to negotiate more favorable agreements with vendors, making it even more acceptable for vendors to prepare and hold goods until your company is prepared to take the shipment.

4. Keeping up with payroll

Meeting payroll consistently is a challenge for many businesses, especially those that wait weeks or months to receive payment from clients. Invoice factoring provides fast access to cash by converting accounts receivable into working capital. This is particularly valuable in industries like staffing, where payroll often comes due long before clients settle their invoices. For instance, with staffing invoice factoring, agencies can maintain steady cash flow and avoid payroll disruptions. But the benefit isn’t limited to staffing firms. Any business can use factoring to reduce financial stress, free up time spent managing receivables, and stay focused on employees, customers, and growth.

5. Capitalizing growth

Your business can benefit from capital expenditures when you work with a factoring company. The best invoice factoring companies should offer low fees and the ability to advance at least 90 percent of the invoice amount, depending on your industry. Invoice factoring with Charter Capital could allow you to cover operational expenses, purchase new equipment, expand your warehouse or business, and make big marketing investments. For instance, for oil and gas service providers, invoice factoring offers a crucial financial lifeline, ensuring steady cash flow to cover operational costs, purchase equipment, and sustain growth in a highly competitive industry.

The factoring company accelerates the payments you would otherwise receive if you were to wait to be paid from your customers in the ordinary course, essentially providing you the cash tied up in your open invoices or accounts receivable for services you have already provided or for products you have already delivered. Working with Charter Capital frees up your time and resources, allowing you to focus 100 percent on your business’s growth instead of dealing with invoices, collections, and accounts receivable.

While factoring involves higher interest than many other types of business financing, the right factoring company can be a great partner to give you quick access to cash for work you’ve already performed, helping you operate and grow your company. Get a free quote today from Charter Capital, and receive fast cash for your growing business!

February 23, 2021
Important Questions to Ask Before Signing a Factoring Agreement
Invoice factoring is a great way to get immediate cash flow, but much of your experience depends on the factoring company you choose. We’ll explore the basics of the factoring process below and highlight a few questions you can ask as a small business owner to help ensure you choose the best invoice factoring company and build a stronger business in the process.

Familiarize Yourself with Invoice Factoring Before You Begin

Known interchangeably as accounts receivable financing, invoice factoring is a distinct mechanism compared to other business funding solutions and transactions. Instead of waiting weeks or months for clients to settle their outstanding invoices, invoice financing companies can purchase your invoices and disburse the cash instantly

How do factoring companies make money?

Factoring companies usually only advance a portion of the invoice’s value upfront. The amount varies depending on your industry and other considerations, but it’s usually between 80 to 90 percent and can be even higher for transportation and staffing industries. When your customer pays the factoring company for the invoice amount, the factoring company deposits you the remainder, minus a factoring discount fee, which the company retains as payment for their services.

What is a factoring fee?

Factoring fees are usually represented as a percentage of the total invoice value. The amount charged will typically be a few percent. However, factoring rates vary based on the factoring company you choose, how long it takes your customers to pay, and how large your company is. Depending on the circumstances, some of the factoring fees at Charter Capital can even be lower than one percent. If you’d like a detailed breakdown of how much invoice factoring costs and how factoring fees are calculated, refer to our factoring cost breakdown for small businesses.

Do banks do factoring?

Banks are geared toward providing loans, which earns them payments for fees and interest. Since factoring isn’t a bank loan—you don’t borrow and don’t have a debt to pay back—it’s not a service banks typically provide.

Get to Know Each Factoring Company

Factoring companies all work a bit differently. You can do a bit of research before you connect with one to determine if your time will be well spent.

What kind of reputation does the factoring company have?

The best source of information is often customer testimonials when it comes to gauging a factoring company’s reputation. Have a look around the net to see what people are saying about any firm you’re considering. At Charter Capital, we make it easy by sharing factoring reviews on our website.

What services do they offer?

Even if a company’s sole focus is invoice factoring, they may provide additional services to help you build a stronger business. For example, Charter Capital offers fuel cards to freight factoring clients. Similarly, companies specializing in staffing factoring can provide tailored solutions to help staffing agencies meet their unique payroll funding challenges, ensuring consistent cash flow for weekly or bi-weekly obligations. For businesses in the security industry, specialized solutions like factoring for security companies ensure consistent cash flow to meet operational needs such as payroll, enabling companies to thrive in a competitive market.

By partnering with the right factoring company, businesses in various industries can access not only cash flow solutions but also industry-specific perks that simplify operations and support growth.

Top 10 Questions to Ask Prior to Signing a Factoring Agreement

Getting answers to the right questions before signing a factoring agreement will help ensure you choose the right one and know what to expect. Ask the ten questions below to any factoring company you’re considering so it’s easy to see which one is right for you.

1. How quickly can I get funding?

The timeline is different for each company, though a few business days is fairly standard. Charter Capital provides same-day funding upon request.

2. What kind of customer service do you offer?

It’s easy to feel like a number when you work with a large factoring company. However, you’ll have a dedicated account manager when you partner with Charter Capital. This person will be your main point of contact and will assist you as needed on an ongoing basis, so you’ll be working with someone who’s not only a factoring specialist but who also knows you and your business well.

3. Does the factoring company provide credit protection?

The level of credit protection you receive will vary from one company to the next too. At Charter Capital, we are interested in the creditworthiness of your customers, so we perform credit checks on them to verify they’re creditworthy in advance. That way, the likelihood of non-payment default due to bankruptcy is diminished, your cash flow remains steady, and your credit is protected.

4. How much is advanced?

Factoring companies usually advance 80 to 90 percent of an invoice’s value, which can be even higher for transportation and staffing. Naturally, the greater the advance, the bigger the cash flow boost your business receives.

5. What are the rates and fees?

Factoring fees covered earlier are only one expense a factoring company may charge. While Charter Capital makes a point of providing transparent pricing, be on the lookout for commonly hidden fees such as:
- Application and Startup Fees
- Servicing Fees (Also Called Administrative or Maintenance Fees)
- Invoice Processing Fees
- High ACH and/or Bank Wire Fees
- Monthly Minimum Fees
- Audit Fees
- Minimum Fee Per Invoice
- Check Clearing Days
- Termination Fees
- Penalties
These types of fees can make an otherwise low appearing factoring rate much more expensive than it would otherwise appear.

6. Do you manage accounts receivable for me?

It’s usually a nice benefit when a factoring company handles your accounts receivable for you because it frees you from chasing payments. It’s even better if they offer perks to your customers, like multiple payment options, as it boosts customer service. Also, make sure to discuss what type of contact the factoring company will have with your customers. Check the factoring company’s reviews and make sure you are comfortable that any customer contact will be handled in a professional way.

7. How are credit checks carried out?

If the factoring company runs credit checks on your customers before accepting their invoices, find out what the process is like. At Charter Capital, the process is quick and free, but this isn’t always the case with other companies.

8. What are the invoice factoring requirements?

The terms will vary for each company. Find out whether you can choose which invoices you want to factor, or if you’re required to factor all your invoices. You may also need to ask this on a per-client basis, whether you’ll need to factor all invoices for a specific customer or if you can choose only certain ones.

9. What is the contract period?

Some companies tie you into long-term contracts. Make sure you understand what your obligations are and choose a company that fits your needs.

10. What other services and support do you offer?

Dedicated account managers and free credit checks are things Charter Capital offers to all our clients. We also have industry-specific perks. For example, trucking companies may qualify for fuel advances and fuel cards. Freight brokers can do carrier Quick Pay too. Always ask what other services a factoring company provides, so you can maximize the benefits and get the most out of your relationship.

Connect with Charter Capital and Get a Free Rate Quote

If you have any remaining questions about factoring, factoring agreement, or how Charter Capital can help, our team is happy to assist. Simply provide us with a few details about your business, and we’ll be in touch with a complimentary rate quote promptly. Begin your journey with us now, and discover how invoice factoring services can provide cash flow solutions and maximize the benefits of factoring for your business.
January 18, 2021
Top 11 Benefits of Small Business Invoice Factoring

Invoice factoring is one of the most popular cash flow solutions, but all too often, small-business owners don’t hear about it until they’ve already leveraged a less-than-ideal tool or they overlook factoring because they’ve come across some misinformation on the net. On this page, we’ll cover some invoice factoring FAQs and then break down what makes it so popular.

Factoring FAQs

To fully understand the benefits of invoice factoring, it’s essential to know the basics, including what invoice factoring is and what it’s not.

What is Invoice Factoring?

Invoice factoring involves selling your accounts receivables (unpaid B2B invoices) to a third party at a discount. Known as a factoring company or factor, the third party pays you immediately for the invoices and then collects payment from your customers.

Is Invoice Factoring a Business Loan?

Invoice factoring is not a loan. You’re not borrowing money, and there’s nothing to pay back. It’s your customer’s job to pay their invoice.

What is a Factoring Account?

Your factoring account allows you to do business with a factoring company. You’ll set it up at the onset of your agreement and then be able to factor invoices according to the agreed-upon terms.

What Are the Pros of Invoice Factoring?

Invoice factoring can be a strategic fit for businesses facing rapid growth, seasonal demand shifts, or cash flow gaps caused by slow-paying customers. It’s especially useful for companies with strong sales but limited access to traditional credit. Many small businesses choose factoring over loans because it provides immediate funds without adding debt or requiring long-term commitments.

Top 11 Benefits of Small Business Invoice Factoring

Now that we’ve covered the basics, let’s look at how invoice factoring can support your business growth and financial health. Below are 11 powerful benefits to consider.

1. You Get Immediate Cash Flow

It’s difficult for small businesses to wait for payment. Invoice factoring works by giving you a quick cash injection by tapping into your unpaid invoices as needed.

2. It Can Help Boost Ongoing Cash Flow

You’re in control of when you factor. So, while many small businesses use it occasionally to meet a cash flow shortfall, others factor more often to keep their cash flow steadier.

3. You Have a Better Chance of Getting Approved

Financial institutions such as banks that provide traditional loans often deny small businesses because they don’t have good credit ratings or haven’t been in business long. Traditional lenders are often less accessible to small businesses, especially those with limited credit history or inconsistent revenue. Factoring isn’t a loan, so your approval isn’t contingent on these things. The company you work with will be more concerned with the creditworthiness of your customers—the ones they’re collecting payment from. With that in mind, it’s much easier to get approved.

4. You Can Have Professionals Managing Your Accounts Receivable

Chances are, managing your invoices isn’t what you do best. It’s just something you do as a part of running a small business. As accounts receivable pros, the company you work with will have more experience managing receivables and tools that make paying invoices easier for your customers, so the process will likely be much smoother, and payments will come in quicker.

5. You’ll Have Extra Support

Invoice factoring is not just a financial solution. You’re essentially outsourcing your receivables to an expert. That frees you from the tedious task of chasing money and can improve your customer relationships.

6. Invoice Factoring is a Flexible Cash Flow Solution

As mentioned earlier, you’re in control of which invoices get factored. You can set up your factoring account now and not leverage it for months or start using it right away and you don’t have to agree to a long-term contract. This makes it ideal for small businesses that experience seasonal lulls and those with occasional needs.

7. You Can Grow Your Business with Invoice Factoring

Once the cash goes into your pocket, you can spend it any way you wish. Many businesses put the funds toward immediate needs, such as payroll, overhead expenses, or purchasing supplies. However, factoring can also be used for growth-related needs, such as marketing, opening a new location, purchasing new equipment, taking on more work, or offering more relaxed payment terms to win a new customer or bid.

8. You Avoid Taking on Additional Debt

Not all debt is bad, but businesses that get involved with things like merchant cash advances and lines of credit often find themselves in a debt spiral they can’t get out of. This isn’t a problem with invoice factoring since it’s a no-debt solution.

9. You Can Manage Cash Flow to Maintain Positive Working Capital

Simply put, you need positive working capital to ensure you can pay all your own bills. Unfortunately, slow-paying customers can throw a wrench in that, causing small businesses to run out of money despite working hard and efficiently. With cash flow steadied through invoice factoring, it’s easier to ensure you have cash on hand to cover all your operating costs.

10. Invoice Factoring Protects Your Finances from Delinquent Clients

Slow-paying customers are damaging to your business, whether that’s through obvious issues, such as running out of cash, or through opportunity cost. Invoice factoring can serve as a layer of protection from these common concerns.

11. Working Capital Financing is a Few Clicks Away

When you work with an experienced factoring company, it’s easy to get set up and you can get funded right away. At Charter Capital, we’re even able to provide our clients with same-day funding.

Expanding Your Small Business with Invoice Factoring

Leveraging invoice factoring can be a powerful strategy for small business growth and financial stability. It helps owners bypass traditional financing hurdles by providing immediate access to capital based on unpaid invoices, without adding debt or risking cash flow interruptions.

Invest in Growth

Beyond covering day-to-day expenses like payroll or supplies, working with an experienced invoice factoring company can give you the flexibility to invest in long-term strategies, such as marketing, opening new locations, upgrading equipment, or taking on larger projects. By turning unpaid invoices into working capital, you can seize opportunities when they arise and keep your business moving forward.

Cover Inventory Costs

For businesses carrying significant inventory, factoring can effectively act as one of the top inventory financing options by providing the cash you need to purchase stock without waiting for slow customer payments. This ensures you can maintain inventory levels to meet demand and support growth.

Get Tailored Factoring Solutions for Your Industry

Choosing a factoring partner with industry expertise can make a big difference. For example, staffing agencies benefit from specialized staffing factoring services that address unique cash flow challenges and payroll needs, while freight brokers gain advantages from freight bill factoring designed to keep carriers paid promptly and trucks on the road.

Request a Quote for Your Small Business

To see how easy and affordable invoice factoring is, connect with a factoring company. Start by requesting a quote from Charter Capital.

December 21, 2020
Raising Capital with Invoice Factoring

In the quest of raising capital for business, small businesses often face hurdles and disappointments. The business landscape is littered with small business owners who’ve stumbled in their search for capital. Many requests are denied and those who can secure more traditional forms of funding, frequently have unacceptable strings attached. Some financial deals come back to bite the business owner in the form of substantial debt, insufficient revenue share or worse.

Raising business capital is difficult and time-consuming, and most small businesses fail because they run out of cash. Getting additional capital in smaller chunks through a factoring fund will get you the cash your business needs without risking a loss of equity or ownership.

Invoice Discounting: A Factoring Service for Business Cash Flow Improvement

Small businesses, particularly, find invoice discounting a viable solution to common working capital challenges. This approach, factoring accounts receivable, has emerged as a powerful tool for startup capital raising, helping businesses access cash quickly and efficiently.

Invoice discounting may be the answer to many business cash flow issues. Gaining in popularity, invoice factoring (also known as Accounts Receivable Financing) is the practice of selling your accounts receivable (invoices) at a discount to a specialized invoice factoring company like Charter Capital. You get the money from Charter Capital and we help you collect on the factored invoices.

The reason many businesses make this move is to ensure the continuous flow of cash to the business without sacrificing equity or incurring debt. Essentially, businesses that use factoring services focus on having most of the money now rather than all of it later. It can take time to collect on an invoice, so when a company finances its accounts receivable through invoice financing, they are getting their money faster and without the hassle of the collection process.

Small Business Working Capital: The Impact of Factoring Invoices

Factoring invoices has become an attractive option for many, freeing up working capital for small businesses, improving cash flow, and allowing them to meet financial obligations promptly, all without traditional funding challenges. By leveraging this strategy, small to mid-sized businesses can bridge the gap between billing and payment cycles, ensuring smoother operations and bolstering growth. The money can be invested in new equipment, used to pay bills, or used toward payroll.

Industries with extended payment cycles can significantly benefit from invoice factoring. For example, oilfield factoring enables oil and gas service companies to turn their unpaid invoices into immediate cash. This boost in cash flow allows them to invest in new equipment, cover operational expenses, and take on larger projects without the financial strain of waiting for client payments.

Moreover, small business invoice factoring pairs well with other types of funding, allowing companies to develop a tailored strategy that fits their needs. For instance, some businesses, especially those that manufacture or distribute physical goods, are better able to fulfill large orders and maintain steady cash flow simultaneously by combining factoring with purchase order financing.

The lesson here is: Access to cash today through raising capital tactics like invoice financing is better than dashed dreams tomorrow.

November 20, 2020
6 Ways to Compare Factoring Companies & Find the Best One

Getting ready to compare factoring companies? As with any financial product, it’s essential to become familiar with factoring and how terms differ from one provider to the next. Below, we’ll break down some of the most-asked questions people have when comparing factoring companies, areas to explore with each factoring company, and traits to look for as you make a decision.

Getting Started

Factoring can give your business an immediate cash injection by tapping into your unpaid B2B invoices. Often thought of as a type of accounts receivable financing, invoice factoring differs in that you’re not taking out a business loan, but rather, are essentially selling your unpaid invoices to the factoring company at a discount. After the factoring company pays you, they assume responsibility for collecting payment from your customer. That in mind, you can think of it as a no-debt cash flow solution intended to help with your organization’s short-term needs.

Do banks do factoring?

Banks offer accounts receivable financing, but they don’t generally offer invoice factoring services. Instead, they usually provide loans that leverage the invoices as collateral. You’re still responsible for chasing your invoices and you’ll pay the bank back over time with installments that include interest.

Can you have more than one factoring company?

You can only work with one factoring company at a time. The reason is fairly obvious—if multiple companies wind up giving you funds for the same invoice, untangling who gets paid would be a mess. This aspect is governed by the Uniform Commercial Code (UCC) which stipulates that a factoring company must file a UCC-1 financing statement when you enter into an agreement with them. The form essentially says that, as a financial institution, your factoring company has an interest in your “property,” which, in this case, is your invoices. It prevents other financial institutions from claiming rights to them. If you decide to switch factoring companies somewhere down the road, you can, but the new company needs to coordinate with you and your old company and file a new UCC-1.

Compare Each Factoring Company as a Business

Before breaking down the packages you’re being offered, evaluate each factoring company on the whole. Make note of details that distinguish the company, itself, from competitors, and whether they lead the pack with customer-friendly practices.

1. How long has the factoring company been in business?

Companies that stand the test of time usually have good track records for success and provide better factoring services. This is essential for you and for your customers, as the factoring company will become the face of your business in terms of collections. Reputable factoring companies have a long-standing history and proven track records, ensuring reliable service for your business.

2. Does the factor have clients in your industry?

Industry-specific expertise can ensure you’re getting a financial product that’s tailor-made for your niche and that the company understands your unique concerns. Oftentimes, invoice factoring companies specialize in a few key areas and build comprehensive solutions to serve that niche.

Industries like oil and gas have unique financial needs due to long payment cycles and substantial operational costs. Choosing a factoring company that offers oilfield factoring can provide specialized services tailored to these challenges. Such companies understand the intricacies of the oil and gas sector and offer solutions that improve cash flow, allowing your business to thrive even amidst industry-specific hurdles.

For example, one area Charter Capital specializes in is trucking and freight factoring. It means our representatives understand what carriers and freight brokers need, common payment terms in the industry, and provide other helpful services, such as fuel cards. There are unique features and benefits for each industry we support.

3. Can they handle your sales volume?

Factoring companies come in all sizes. Some may not have the ability to support your needs and you don’t want to find that out when you’re struggling with a cash flow issue and counting on your factoring company to come through. It’s also worth noting that you’ll generally pay less the more you factor, so selecting a company that can handle your sales volume can help ensure your costs stay low too.

4. Does the factor require minimum factoring fees?

Some companies tie you in with monthly minimums. For example, they may stipulate that you pay a certain amount each month regardless of whether you factor, or they may require you provide them with a certain volume each month. Small-business owners may look at these terms and think they’re doable, only to find their cash flow issues are reduced down the line and wind up paying for services they don’t really need.

5. Does the factor require a long-term commitment?

Don’t sign onto long-term contracts unless you really need to. As mentioned above, you may not need to factor for an extended period of time. Lots of businesses factor just to get through a seasonal lull, to get through an economic crunch, or to deal with an unexpected issue. Work with a company that lets you factor only the invoices you need to factor when you need to factor them.

6. Are the factor’s advance and fee structure competitive?

Get a general idea of advance rates and fee structures to ensure the company is competitive as a whole. For example, you’ll typically see advance rates ranging from 70 to 90 percent the invoice value and fees between one and five percent of the invoice value.

Pick the Best Factoring Company by Comparing Key Features

Once you evaluate factoring companies, you’ll want to take a look into the specifics of the package or product each of your leading choices offers. The best factoring company for your needs is likely to stand out.

Recourse vs non-recourse

Find out who is responsible if a customer doesn’t pay their invoice. Your factoring company will examine your customer’s creditworthiness, and thus likelihood of paying, prior to agreeing to factor an invoice, so non-payment is rare. However, in the event someone does skip a bill or go bankrupt, you’re ultimately responsible for their debt with recourse factoring. With non-recourse factoring, the factoring company assumes responsibility for the debt, though it’s usually in exchange for higher fees and/ or reduced advance rates.

Flexibility

Watch out for minimums and long-term contracts. Factoring is generally thought of as a short-term solution. Although large well-established companies may use it from time to time to avoid taking on debt while sorting out a cash flow issue, it’s more often leveraged by small and midsize businesses that eventually solve their cash flow issues or move onto bank-supplied solutions like lines of credit and term loans. If you’re tied into a minimum or a long-term contract, you could be forced to keep paying even when the model no longer suits your needs.

Factoring fees

Get an estimate to determine your actual rates so you can do a proper comparison. A lot of companies say they offer factoring fees of two percent or less, but your actual factoring fees will depend on a number of things, such as volume and the creditworthiness of your clients. You may not qualify for two percent even if its advertised. The same is true of advance rates.

Funding time

Find out how quickly you’ll get your cash and if there are additional fees for expedited service. Whereas some factoring companies offer same-day funding, others can take several days to a week or more.

Perks and value-added services

Explore what other benefits you qualify for by partnering with a company. As mentioned earlier, fuel advances are one way Charter Capital helps our trucking and freight clients. We also provide perks like free credit checks on your customers, 24/7 account access, and a dedicated account manager for clients in every industry, as well as other industry-specific perks.

Get a Free Rate Quote

As a leading recourse factoring company, Charter Capital provides competitive rates, flexible funding, same-day payment, and a wealth of perks, all with no long-term contracts. Explore how Charter Capital can help your business with a free rate quote.

September 30, 2020
Factoring Without the Fear

Historically, invoice factoring has not been well-known especially among small business owners.

Accounts receivable factoring now accounts for more than $1 trillion a year in business funding. That is more than three times what it was in the early 1990s. Since then, factoring companies have become more reputable and service-oriented while providing readily available funds to businesses that are challenged with cash flow issues.

Although factoring has not generally been well known in the past (except in a few specific markets like textiles and transportation), it has recently become a sought-after cash flow management tool for the small to mid-sized business (SMB) market across many industries. This is recent, in large part, due to big companies slowing their payment to small businesses (see article “Big Companies Are Slowing Supplier Payments”) creating severe cash flow problems for these smaller suppliers.

For those unfamiliar with Invoice Factoring, it is the process of a business acquiring cash by selling its accounts receivable (invoices) at a discount to a factoring company. The discount, or cost to the business is equivalent to a prompt pay discount a business might otherwise offer to a customer account. The business receives the cash up front from the factoring company and the factoring company takes responsibility for processing the receipts under lock-box control. It can take time to collect on an invoice, so when a company factors its accounts receivable, the company essentially gets its funds upfront while the factor manages the process of collecting the payment remittances — saving the company time, money and positive cash flow.

Factoring is not just available to large organizations. With small business invoice factoring, business owners can retain control of their company and benefit from the ability to grow quickly or at a moderate pace. Small business factoring is all about control and cash flow management. More savvy business owners will work the factoring fee into the product or service provided. Others use the extra cash to take quick-pay discounts from suppliers by paying early. With the right financial strategy, factoring can also provide long-term cash flow management, not just a quick fix.

As more and more small businesses discover the benefits of factoring, new industries are warming up to the idea that there is a readily available source of cash hidden within their accounts receivable. In fact, factoring has become so much a normal part of business financing, that universities are now teaching it in relation to cash flow management.

Streamlining Cash Flow with Factoring for SMBs

With the growth of small and mid-sized business (SMB) financing, small business factoring emerges as a method to maintain steady cash flow, devoid of the common fear associated with credit risk and extensive paperwork. This method allows businesses, especially those in industries like trucking, where the need for quick fund access is critical, to turn their accounts receivable into immediate cash. Unlike traditional loans, which depend heavily on a company’s credit history, invoice factoring relies on the creditworthiness of the client’s customers. This shift offers a flexible, risk-mitigated financial strategy, allowing business owners to focus on growth rather than cash flow bottlenecks.

Bulk factoring, an advanced form of this financing method, further simplifies the process for companies with numerous outstanding invoices, making it an attractive option for those wary of bad experiences with banks or concerned about hidden fees. By submitting invoices to a factoring company, businesses can receive an advance on a portion of the invoice value, often within a short period, enabling them to meet payroll, invest in new assets, or simply maintain a steady playing field in competitive industries such as the trucking sector.

Moreover, the integration of technical solutions and the absence of extensive contract obligations make this method increasingly preferred among modern businesses. It’s a testament to how far factoring has come, from a misunderstood finance option to a cornerstone strategy for enhancing cash flow without the fear historically associated with external funding. As more companies recognize the benefits, including the potential to leverage factored funds for strategic investments or to capitalize on early payment discounts from suppliers, the stigma around factoring continues to diminish, setting a new standard for financial management in the SMB sector.

As more small businesses across various industries recognize the potential of factoring to ease cash flow constraints, it’s clear that this financial tool isn’t limited to a single niche. In particular, staffing factoring has become a popular solution for agencies needing quick access to funds for payroll and operational expenses. By leveraging the value of unpaid invoices, staffing companies can secure immediate capital without incurring debt, making it easier to cover weekly or bi-weekly obligations and focus on expanding their workforce.

This narrative not only acknowledges the historical apprehensions surrounding factoring but also highlights its evolution into a sophisticated, risk-managed financial solution that aligns with the dynamic needs of today’s businesses. Through the lens of invoice factoring, companies now have the opportunity to redefine their approach to cash flow management, ensuring they are well-positioned to navigate the challenges and opportunities of the modern business environment.

Finding the best factoring company for your needs has never been easier. Charter Capital provides Invoice Factoring Services to growing companies in a number of industries. Contact us today to learn more about our services or for a free, no-obligation quote.

September 9, 2020
Optimized Cash Flow Solutions with Factoring
Trucking is a race against the clock. As every truck driver knows, the constant pressure to navigate traffic snarls, avoid highway closures, overcome mechanical problems, and stay awake and alert to deliver their load at the contracted time is only part of the story. Another critical element that keeps the wheels turning is effective cash flow management.

Tackling Cash Flow Challenges in the Trucking Industry

Just as the driver’s truck runs on diesel fuel, the owner’s company runs on business cash flow. Whenever a customer is slow to pay their invoice, it’s a troublesome pothole in the trucking company’s cash flow. Get enough of these slow-payers, and the result is the trucking firm’s ability to pay its own bills, expenses, and its employees can grind to a halt.

For many trucking companies, freight bill factoring provides a reliable solution to these cash flow challenges. By converting unpaid invoices into immediate cash, factoring ensures that trucking firms can manage operational costs and keep their fleet running, even when clients delay payments.

With that said, factoring is not just a solution for trucking, it plays a critical role in staffing, helping agencies cover payroll while waiting on client payments, as well as in security firms, ensuring operational stability for contracted services. It is also widely used in industries like oil and gas, where businesses rely on factoring to manage cash flow fluctuations and sustain operations. These examples highlight factoring’s versatility as a financial tool across multiple industries.

Cash Flow Small Business Problems and Solutions

Smaller trucking companies are especially at risk of cash flow management challenges problems. They have fewer trucks on the road, so the small profit margins prevalent throughout the industry hit them harder. A two- or three-truck operation can face real trouble when one of those trucks breaks down unexpectedly. Add several slow-paying customers into the mix, and suddenly the firm is confronting a severe cash flow problem at a time when they need funds the most.

Factoring Cash Flow: An Effective Solution for Slow Payments

Has this happened to your trucking company? Is your collections department currently struggling with slow-paying customers not taking care of their invoices in a timely manner? Are you looking for cash flow management solutions that will enable you to improve business cash flow and keep cordial relations with your customers, and avoid late payments or noncollectable accounts?

Real-World Use Case: How Freight Factoring Keeps Fleets Moving

Delayed broker and shipper payments can leave small trucking operations in a financial bind, especially when critical costs like fuel, payroll, and maintenance can’t wait. That’s where freight factoring becomes more than just a cash flow tool; it becomes an operational lifeline.

Example Scenario

A three-truck fleet hauls loads across multiple states, with weekly fuel expenses exceeding $6,000 and driver payroll due every Friday. When a major broker pays on a 45-day cycle, the fleet owner risks missing payroll and fuel deadlines.

How Factoring Helps

By factoring their unpaid invoices, the fleet receives cash within 24 hours. This immediate funding covers:
- Fuel cards to keep trucks fueled and routes on schedule.
- Driver wages paid on time to retain talent.
- Preventive maintenance to avoid costly breakdowns.
Instead of tapping into reserves or taking on debt, the owner leverages the broker’s credit to meet operational needs without delay. This use of factoring turns static receivables into working capital that keeps the business running and growing, load after load.

Cash Flow Improvement Through Invoice Factoring

The good news is such a solution exists that lets you keep on trucking with invoices paid and cash flow problems now in the rearview mirror. Cash flow factoring, also known as accounts receivable financing, is your ticket to improve cash flow and navigate the financial gaps in your trucking business.

Factoring your invoices is one of the best cash flow management solutions for improving your accounts receivable turnover ratio. With this type of alternative business funding, the factoring company advances you funds for your accounts receivable invoices. The factoring company pays you right away for your outstanding invoices and takes care of collecting them from that point forward, freeing you of the troublesome and time-consuming chore of payment collection. Invoice factoring is also quick – you can usually get paid within just a day or two instead of waiting the usual 30, 60, or 90 days or more.

The Benefits of Business Factoring and Improved Cash Flow

Factoring companies can get you the money you need when you need it… with no long-term obligations. Gone is the worry and hassle of slow pay collections, bad debts, and doubtful accounts. Instead, you’re now free to run your business, to buy new equipment, hire new employees, expand operations, pay bills, or whatever else you choose. And, best of all, invoice factoring isn’t a one-time solution.

You can utilize invoice factoring as often as you need to keep your cash flow running as smoothly as your fleet on a wide-open, traffic-free road. Invoice factoring is a convenient alternative to traditional bank loans or fee-laden online loans. To learn more about how factoring companies work, simply get in touch.
October 22, 2019