If your trucking business suffered a weaker bottom line in 2017 due to unpaid debt, there is another way to free up capital by turning to accounts receivable financing solutions.
For instance, more trucking companies in the U.S. have used invoice factoring to increase cash on hand. You may think that a small business loan from institutions such as tabbank.com will suffice, but there are certain challenges of securing loans from banks or financial institutions.
Invoice factoring serves as a better option than bank loans since the latter will require your business to meet stringent requirements. Banks normally reject applications from companies that have little to no credit history.
It is safe to assume that most start-up companies become unsuccessful to secure a loan for this reason. Hence, many companies rely on freight factoring to gain short-term capital for the most pressing expenses.
This process works by selling your invoices at a discounted rate in exchange for the immediate funds, which are normally equal to the amount of the discounted invoices.
If you usually wait between 30 and 90 days to receive payment from customers, then invoice factoring can solve your cash flow problems. As long as you deal with trustworthy clients, most financing companies will be willing to assume the default risk because of acquiring your invoices.
Aside from eliminating the risk of unpaid invoices, another advantage of invoice factoring involves no limits on the potential amount of immediate funds. You get to decide the number of invoices you plan to sell, so the limit works in your favor.
Cash proceeds only take 24 hours before reflecting on your preferred account as well.
Remember that invoice factoring should not be a substitute for efficient money management. Like any other financing option, it also has its fair share of benefits and disadvantages.