Monthly Archives: February 2022

How Does Debt Factoring Improve Cash Flow?

Cash flow is an ever-pressing matter for businesses. Payroll, taxes, operations, inventory, profits, and repairs depend on a healthy inflow and outflow of money from a company.

Unfortunately, maintaining a steady, positive cash flow is not always possible. Many industries, such as transportation, rely on the timeliness of their customers to fulfill invoices – and customers are not always prompt to pay. When invoices fall behind, and a company’s liquid assets begin diminishing, factoring is often considered.

Why do companies use factoring? Are there specific scenarios when factoring is a safe, healthy option for a faltering organization? In short, yes! In the content below, we define factoring and discuss three common circumstances that benefit from the unique financing solution.

How Does Factoring Work?

In the simplest terms, factoring is the process of purchasing unpaid invoices.

Traditional factoring includes a factor – such as our company – purchasing an unpaid invoice from a transportation company, putting cash in the hands of that company immediately. Once the customer pays the invoice, that money is given to us.

Many trucking companies wonder if they are liable to pay the invoice in the event that the customer never pays it. It depends! There are two main kinds of factoring, recourse and non-recourse, and both address this issue differently.

Recourse factoring places liability to repay the invoice in the hands of the trucking company. Non-recourse factoring assumes the responsibility of the invoice entirely. Thus, if the customer never pays back, the non-recourse factor takes the hit.

1. Factoring to Invest

Sometimes, the perfect investment opportunity appears out of thin air – right when your company does not have the financial freedom to jump on it. In other scenarios, investment opportunities are more deliberate. Perhaps you need to purchase a new fleet of vehicles or hire new employees.

Regardless of the venture, investments are designed to produce exponential growth in the future. However, they require a lump sum of money.

Small businesses and startups without a large customer base or steady cash flow often face this challenge: one must spend money to make money. When an opportunity presents itself, but your company is waiting on invoices to be paid, factoring is an immediate, safe solution.

2. Factoring to Repair

The importance of commercial truck maintenance cannot be overstated. Your fleet of trucks is crucial to a thriving company, and preventative maintenance plays a significant role in business growth and resource preservation.

Logistics companies often look to factoring to increase cash flow for truck maintenance. The truck driver can perform some maintenance before he or she begins transport. Other maintenance requires a professional. When something breaks down, a repair person should be alerted and hired to make necessary repairs.

Why would a transportation company require factoring to pay for repairs? Can truck repair wait for a brighter financial future? Most often, the answer is no. Truck maintenance should not be delayed.

We often list five arguments for the importance of truck maintenance:

– Fewer breakdowns. Proactive maintenance will help reduce the number of unexpected breakdowns – dramatically. When a truck breaks down, shipments fall behind and jobs are delayed. Ultimately, spending money for a repair will save on future disruptions.

– Fewer accidents. Fewer breakdowns mean fewer accidents. Working headlights, working brakes, etc. promote driver safety. When truckers are safe, other vehicle drivers are protected. The well-being of your employees is worth the investment of truck maintenance.

– Operational optimization. Maintained trucks work well! A fleet that is taken care of should operate at optimal functionality, lowering fuel expenses and lengthening the lifetime of your trucks.

– Happy customers. Smooth shipments, without unexpected breakdowns, often result in satisfied customers. Satisfied customers are often repeat customers.

– Legal requirements. Last, but certainly not least, the law requires commercial trucks to meet proper road safety standards. When a vehicle in your fleet needs to take a Commercial Vehicle Road Worthiness Test (CRVT), maintained trucks are likely to pass immediately.

3. Factoring for Payroll

Are you falling behind on payroll? Payroll factoring is an excellent resource for companies that care about the wellbeing of their employees but are experiencing an unexpected cash flow shortage. This can be all too familiar for businesses with many outstanding invoices.

Factoring as a Bank Loan Alternative: 3 Benefits

In the three scenarios explored above, a traditional bank loan could provide the funds needed to address investments, truck maintenance and repair, in payroll difficulties. However, some logistics companies do not qualify for traditional bank loans. Why? Qualifying for a bank loan often requires several qualifications, including excellent credit and experience. Some transportation companies simply do not have those two qualifications. Perhaps you have poor credit or have just started your business.

Additionally, factoring can serve as a traditional bank little alternative when a company needs cash flow fast. Traditional bank loans often take time to process. Factoring is fast. Some factoring companies can begin an agreement within a few days of application.

Finally, when you take a loan from the bank, you have to pay the bank back! Thus a traditional loan builds debt. For many transportation companies, debt should be avoided whenever possible. Factoring is a debt-free financing option.

Advanced Commercial Capital: Factors Who Care

In the modern-day, finding a financial organization that cares completely about its customers can be difficult. At Advanced Commercial Capital, we break this mold. We aim to serve our customers in every area.

How do we show this? Firstly, we offer non-recourse factoring services, meaning we assume the responsibility of our customers’ invoices – completely. Secondly, we do not require long-term contracts. Our goal is YOUR good, and we aim to demonstrate our value consistently.

If you are interested in discovering how factoring could impact the health of your transportation company, we would love to get in touch. Reach out to a team member at 855-465-4655 or complete our online contact form. We look forward to starting a conversation!

What is Freight Factoring & How Does it Work?

Freight factoring is one of the most readily utilized methods of financing in the logistics industry. Though popular, every business is unique: what works for one trucking company may not be the best option for yours.

How do you know if freight factoring is the right financing method for you? This blog is a great place to start! In the content below, we define freight factoring, answer financing method FAQs, and examine a few of the most compared financing methods.

What is Freight Factoring?

Freight factoring serves as a strategic collaboration between a factor and a trucking company, addressing the challenge of unpaid accounts receivables. When a trucking company faces outstanding invoices, the factor steps in, acquiring these receivables at a discounted rate. This prompt transaction injects much-needed cash directly into the hands of the trucking company.

The process is straightforward: the trucking company’s client fulfills the invoice, the freight factoring company is reimbursed in full. This relationship ensures that the wheels keep turning smoothly, with the trucking business enjoying a continuous cash flow.

The appeal of freight factoring is its flexibility and ability to meet various financial needs of trucking companies. Whether it’s seizing business opportunities, covering daily repairs and vehicle maintenance, managing payroll, or even fuel expenses, freight factoring proves to be a versatile solution.

The two primary methods of freight factoring are: recourse and nonrecourse factoring. These avenues offer trucking companies flexibility in choosing the model that aligns with their specific requirements. Whether opting for the added flexibility of recourse or the risk mitigation provided by nonrecourse factoring, trucking businesses can tailor their approach to suit their financial objectives.

In essence, freight factoring emerges as a dynamic financial strategy, ensuring a steady and increased cash flow for trucking companies. It’s not just a transaction; it’s a partnership that propels the trucking industry forward, providing the financial stability needed for growth and operational resilience.

How Does Freight Factoring Work?

A key benefit to freight factoring getting paid quickly, providing a boost for trucking businesses. The way this works is, trucking companies submit invoices for same-day processing, ensuring a steady cash flow to keep operations running smoothly.

This collaboration benefits everyone involved. Trucking companies enjoy speedy payments, avoiding the usual delays of traditional invoicing. Factoring companies make money by charging a percentage during the invoice purchase, which they earn when collecting from the customer. Customers can trust dealing with financially secure partners in the industry.

Here’s a quick overview of the process:

Application and Agreement:
• Trucking companies start by submitting an application. Once approved, a detailed factoring agreement is set up, covering rates and fees.

Load Booking and Submission:
• With approval, the trucking company books a load and submits essential documents, including a bill of lading and rate sheet, to the factoring company.

Advance and Payment Terms:
• The factoring company advances the invoice amount, deducting a predetermined fee based on agreed-upon payment terms.

Payment by Broker or Shipper:
• The final step involves the freight broker or shipper making payment to the factoring company within 30 to 90 days.

As part of the process, credit checks on clients help reduce risks, aiding trucking companies in choosing reliable partners. The choice between recourse and non-recourse factoring agreements adds flexibility, allowing businesses to tailor their approach based on specific needs.

In essence, freight factoring offers a straightforward solution for trucking businesses seeking immediate payments and financial stability.

Recourse Factoring

As the name implies, recourse factoring involves recourse. Recourse factoring companies require collateral. If a customer does not fulfill the invoice, the trucking company is then held responsible for repaying the purchased account receivable.

To help minimize risk, most recourse factoring companies only accept trucking companies with creditworthy clients. Even so, sometimes customers fail to pay completely, positioning the trucking company with the same cash flow concerns as before.

Why would a trucking company choose recourse freight factoring? Though recourse factoring is riskier than nonrecourse, companies with enough capital to repay for an unfulfilled accounts receivable may choose this option, because recourse factoring rates are often lower. However, not all trucking companies have the capital to take the risk.

Nonrecourse Factoring

Nonrecourse factoring does not involve recourse, therefore dropping the collateral requirement. Although the factoring rate is sometimes higher than recourse, the factoring company assumes all the risk of purchasing the account receivable. If a customer fails to pay their invoice, the factor absorbs the bad debt.

Small to-mid sized trucking companies often utilize nonrecourse factoring because of the security involved.

Freight Factoring FAQ

As a nonrecourse factoring company, we readily receive questions about freight factoring. Hopefully, we will address any concerns or questions you may have.

Who is Responsible if My Customers Don’t Pay?

As mentioned, this depends on the method of freight factoring. Recourse factoring places responsibility for unpaying customers in the hands of the trucking company, while nonrecourse factoring places responsibility on the factor.

At Advanced Commercial Capital, we have a nonrecourse program where we assume all risk on purchased invoices.

What is the Difference Between Factoring and Securitization?

Although there are multiple differences between factoring and securitization, the primary involves the number of individuals purchasing the receivables. Factoring involves a sale to a single factor, while securitization often includes multiple investors.

Who Receives the Payments From My Customers?

Once the factoring company purchases an invoice, the customer will pay the factor directly. Payments accidentally given to the trucking company should be immediately forwarded to the factor.

How Long Do I Have to Factor?

Although we cannot speak for all factoring companies, we strive for flexibility at Advanced Commercial Capital. Thus, our customers are not obligated to factor for a specific length of time, and there are no maximum or minimum number of invoices or dollar volumes needed to qualify for our factoring program.

How Quickly After Submitting an Invoice Can I Get Paid?

Once the invoice and all supporting documents have been received, the trucking company receives payment within one business day. In certain circumstances, quicker payment can be provided.

Freight Factoring vs Traditional Bank Loan

For some companies, a traditional bank loan may be a better financing method. However, we often encourage trucking companies in need of immediate cash flow to pursue freight factoring.

Consider these three elements:

• Firstly, bank loans can be challenging to acquire. Factoring companies consider the creditworthiness of a trucking company’s clients, while banks consider the creditworthiness of the trucking company itself. Thus, if a trucking company has bad credit, it will have a difficult (if not impossible) time pursuing a loan.

• Secondly, bank loans take time to receive. When a trucking company needs cash fast, factoring provides cash flow within a matter of days – sometimes sooner. The process of applying for and receiving a bank loan is much longer.

• Finally, factoring is flexible. Choose a trustworthy transporting company with no minimum volume requirements or long-term contracts. Your business can benefit from the financing as needed… and only as needed. Factoring offers a sense of financial freedom and flexibility that traditional bank loans cannot.

Advanced Commercial Capital: Trustworthy Freight Factoring

Still, have questions about freight factoring? Our team at Advanced Commercial Capital is ready to respond!

We provide cash flow for trucking companies with zero unpleasant surprises. Additionally, our program involves numerous benefits – from a free fuel discount card program to free credit checks – designed to help you be successful at your job while saving time and money.

Interested in pursuing freight factoring for your company? Give us a call at 855-465-4655 or complete our online contact form! A specialist will respond shortly.

What is Factoring?

Most businesses have experienced the frightening pressure of withering cash flow. Whether unexpected expenses appeared, your customers are refusing to pay, or a conglomeration of both circumstances, a multitude of situations can stunt cash flow. Of course, a business can only scrape by from reserves for so long – eventually cash flow is necessary to keep the business alive.

Sometimes, these frightening times coincide with growth opportunities! What should you do if you don’t have the capital to jump on expansion prospects (let alone pay for an equipment repair)? For many companies, financing is the best option. In the logistics industry, freight factoring is a common option.

In the content below, we define factoring and compare factoring with both forfaiting and traditional bank financing, offering insight into which is best for the long-term success of your business.

What is Factoring?

Factoring at its simplest definition is a method of financing, also known as accounts receivable financing or invoice factoring.

Trucking companies often approach freight factoring organizations with multiple unpaid invoices and cash flow needs. When a trucking company approaches the factoring organization, the factor will often purchase unpaid invoices from the company at a discounted rate. The factor will then pursue the client who needs to pay the invoice. Once the invoice is paid, the factor receives the money. Because the invoice was purchased at a discounted rate, the freight factor will come out net positive.

Freight factoring also benefits the trucking company. Waiting for customers to pay invoices can strangle cash flow, inhibiting companies from hiring drivers, repairing trucks, or taking advantage of growth opportunities. Factoring provides the company with immediate cash flow.

Unlike a traditional bank loan, factoring financing turnaround is extremely fast. Factoring companies choose to work with trucking organizations based on the credit history of the company’s clients, not on the credit history of the company itself. This allows for fast financing and higher acceptance rates. Using a factor provides quick cash access – even when banks aren’t willing to lend.

Recourse Factoring vs Non-Recourse Factoring

There are two distinct factoring methods, and both are important to understand when looking for the best factoring company for your needs: recourse factoring and non-recourse factoring.

Recourse factoring puts the responsibility of paying the invoices into the hands of the trucking company. For example, if the factor purchases three invoices and your customer does not pay them, you are responsible for fulfilling that debt. For leverage, the factor will often accept a deposit and hold it until the invoice is paid.

Alternatively, non-recourse factoring puts the responsibility of fulfilling the invoice into the hands of the factor. Once the factor purchases your invoice – typically at a discounted rate – the factor takes responsibility.

Even if the client does not pay, you are not liable for paying the factor or purchasing the invoice back. As you may assume, trucking companies often prefer this method! Non-recourse factoring is safe.

Factoring vs Other Financing Methods

Factoring vs Forfaiting

Forfaiting is another method of export financing. One small business resource writes: in the forfaiting scenario the “export sells its claim on medium and long-term trade receivables to a forfeiter at a discounted rate to receive fast access to cash.”

Because the trade receivables are sold at a discounted rate, the forfeit does not demand a reserve. The responsibility to pay the receivable is not on the importer. In this aspect, forfaiting resembles non-recourse factoring.

If both methods follow similar functions, how are they different?

Factoring and forfaiting have one major difference: factoring can be applied to international and domestic trade while forfaiting only applies to international trade.

Three additional distinctions between both financing methods include:

1. Timing: While factoring is typically applied to short-term accounts receivables, forfaiting involves long-term accounts.
2. Type of Goods: Factoring applies to any variety of normal goods; forfaiting applies to capital goods.
3. Process: Though both financing methods provide companies with fast cash, the processes differ slightly. As discussed earlier, factoring involves the factor of purchasing unpaid invoices from trucking companies at a discounted rate. In contrast, forfaiting involves the forfeiter purchasing rights of trade receivables from an exporter.

Factoring vs Traditional Bank Financing

A traditional bank loan works well for certain companies. However, for those who need cash fast without accruing additional debt, factoring is often the better option.

The lending market is simply not as fast or acceptant as factoring companies. If your trucking company does get approved, the loan is set and may not be enough to ease your financial strain. Additionally, you will eventually have to repay that debt. Factoring allows companies cash flow without strings attached – if you have an invoice to sell, you can earn immediate cash.

Advanced Commercial Capital: Freight Factoring Resource

Need a cash flow boost? At Advanced Commercial Capital, our non-recourse freight factoring service is as-needed and commitment-free. We give our customers zero unpleasant surprises, and therefore, we are the industry leader in factoring for trucking companies.

With over 100 years of combined experience, our team of financial experts has helped hundreds of struggling trucking companies with cash flow needs. We are ready to help your company succeed too.

Contact us for a freight factoring quote today! Give our team a call at 855-465-4655 or complete our online contact form.

Look Out for These Common Trucking Scams

As the owner of a trucking company, you’re managing a large pool of drivers, customers, and loads. You already have a lot to handle, so the last thing you want to deal with are scam artists wanting to take advantage of your busy schedule. As with every other industry, no one is immune from becoming a target of a scam, no matter the size or value. Staying informed will keep you one step ahead of fraudulent practices and keep your company and employees safe. If you’re looking for more information here are five common trucking fraud scams to be aware of and how you can avoid becoming the victim of one.

Common Trucking Fraud Scams

Driver in Need: If you’re a company with an exceptionally large number of drivers, you may be a target of this type of scam. The fraudster will collect information from another driver by conversing with them or overhearing it from a truck stop and will use it to call dispatch to request a cash advance.

Phony Repair Shop or Fake Towing: Trucks commonly need to be repaired or even towed during service. The trucking company covers the expenses for repairs, and occasionally a scammer can exploit this by making false calls to a company asking for payment. The scammer provides vehicle information and a driver’s name and sometimes a fake invoice. The goal is to make the trucking company believe the load will be withheld from the driver until payment is received to get the company to pay up.

Fake Police Officer or Department of Transportation (DOT) Inspector: This act of trucking fraud involves a scammer posing as a fake government official. They will contact a trucking company to demand payment over a fake violation to get the truck back. You should also look out for notices in the mail asking for payment for renewal fees and threatening fines for missing the payment.

False Freight: This scheme happens when the driver is not allowed to supervise loading. Often the doors are sealed shut, preventing the driver from being able to ensure inventory counts, but is often still required to sign off on it anyway. Only when the delivery is complete do you realize the piece count is off and the scammers likely stole some of the freight.

Load or Fuel Advance Scams: A popular scam in the industry that targets brokers. Scammers steal the identity of a legitimate trucking company and book loads without any attention of picking them up. Instead, they request a cash advance for fuel and travel expenses. Once received, one of two things could happen. The scammer either disappears or more aggressively, holds the load hostage to demand further payment. Either way, the broker is left with money out of pocket and still in need of finding an actual driver to haul the load, if you’re lucky enough to still have it.

Double Brokering: Although this act entirely involves legitimate parties, you want to make sure you do not become a victim of this, and it’s another one that focuses on brokers. This time it occurs when a broker books a load for a carrier, but in turn that carrier brokers the load to a third party without the consent of the original broker or customer. In this case, the actual carrier of the freight is not under the original contract and therefore is uninsured. If the company that booked the third party does not pay the carrier who moved the load, then the original broker could possibly be on the hook for both payments.

How to Avoid Trucking Fraud

As it happens, you already took the first step of avoiding trucking fraud by reading about common scams. Knowing how to identify scams as they occur will stop you from making a mistake.

Here are a few pieces of advice to follow as well:

• Train drivers to not divulge important information in public and to always be aware of their surroundings.
• Request an invoice, and if actually provided one, review it carefully. If no valid address or phone number can be found,
• Find ways to validate the carrier or service provider. Always speak with the driver directly to confirm they are who they say they are. Try asking for information not readily visible on the truck such as the DOT number or employee ID number.
• Directly transfer funds to the driver, not a provider. Don’t risk sending payment to an unknown third party. Also, it’s best practice not to issue fuel advances to a new carrier you haven’t worked with before. Wait until they establish trust by successfully delivering a couple of loads before granting permission to receive cash advances.
• Always be suspicious if someone is pressuring you for immediate payment. Ask yourself if the situation urgently requires you to do so. If absolutely necessary, then just issue a smaller percentage of the cash advance instead of the full amount.

Advanced Commercial Capital: An Industry Resource

Advanced Commercial Capital is here to help the freight industry continue to grow with confidence. We’re in the business of helping your business grow through fair and honest invoice factoring. We protect our clients from unpaid freight invoices due to fraud, bankruptcy, or delinquency, without any surprises. To learn more or go get in touch with our team, call our office at 855.465.4655 or fill out our online contact form today.