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The Logistics and Transportation Industry in the United States
The logistics and transportation industry in the United States is highly competitive. By investing in this sector, multinational firms position themselves to better facilitate the flow of goods throughout the largest consumer market in the world.. International and domestic companies in this industry benefit from a highly skilled workforce and relatively low costs and regulatory burdens.
Spending in the U.S. logistics and transportation industry totaled $1.33 trillion in 2012, and represented 8.5 percent of annual gross domestic product (GDP). Analysts expect industry investment to correlate with growth in the U.S. economy.
A highly integrated supply chain network in the United States links producers and consumers through multiple transportation modes, including air and express delivery services, freight rail, maritime transport, and truck transport. To serve customers efficiently, multinational and domestic firms provide tailored logistics and transportation solutions that ensure coordinated goods movement from origin to end user through each supply chain network segment.
This subsector includes inbound and outbound transportation management, fleet management, warehousing, materials handling, order fulfillment, logistics network design, inventory management, supply and demand planning, third-party logistics management, and other support services. Logistics services are involved at all levels in the planning and execution of the movement of goods.
Air and express delivery services (EDS):
Firms offer expedited, time-sensitive, and end-to-end services for documents, small parcels, and high-value items. EDS firms also provide the export infrastructure for many exporters, particularly small and medium-sized businesses that cannot afford to operate their own supply chain.
High volumes of heavy cargo and products are transported long distances via the U.S. rail tracking network. Freight rail moves more than 70 percent of the coal, 58 percent of its raw metal ores, and more than 30 percent of its grain for the nation. This subsector accounted for approximately one third of all U.S. exports.
This subsector includes carriers, seaports, terminals, and labor involved in the movement of cargo and passengers by water. Water transportation carries about 78 percent of U.S. exports by tonnage, via both foreign-flag and U.S.-flag carriers.
Trucking: Over-the-road transportation of cargo is provided by motor vehicles over short and medium distances. The American Trucking Associations reports that in 2012, trucks moved 9.4 billion tons of freight, or about 68.5 percent of all freight tonnage transported domestically. Motor carriers collected $642 billion in revenues, or about 81 percent of total revenue earned by all domestic transport modes.
American Association of Port Authorities
American Society of Transportation and Logistics
American Trucking Associations
Association of American Railroads
Council of Supply Chain Management Professionals
Express Delivery and Logistics Association Industry Publications:
Journal of Commerce
Material Handling & Logistics
North American Industry Classification System For Transportation
The Transportation and Warehousing sector includes industries providing transportation of passengers and cargo, warehousing and storage for goods, scenic and sightseeing transportation, and support activities related to modes of transportation. Establishments in these industries use transportation equipment or transportation related facilities as a productive asset. The type of equipment depends on the mode of transportation. The modes of transportation are air, rail, water, road, and pipeline.
The Transportation and Warehousing sector distinguishes three basic types of activities: subsectors for each mode of transportation, a subsector for warehousing and storage, and a subsector for establishments providing support activities for transportation. In addition, there are subsectors for establishments that provide passenger transportation for scenic and sightseeing purposes, postal services, and courier services.
A separate subsector for support activities is established in the sector because, first, support activities for transportation are inherently multimodal, such as freight transportation arrangement, or have multimodal aspects. Secondly, there are production process similarities among the support activity industries.
One of the support activities identified in the support activity subsector is the routine repair and maintenance of transportation equipment (e.g., aircraft at an airport, railroad rolling stock at a railroad terminal, or ships at a harbor or port facility). Such establishments do not perform complete overhauling or rebuilding of transportation equipment (i.e., periodic restoration of transportation equipment to original design specifications) or transportation equipment conversion (i.e., major modification tosystems). An establishment that primarily performs factory (or shipyard) overhauls, rebuilding, or conversions of aircraft, railroad rolling stock, or a ship is classified in Subsector 336, Transportation Equipment Manufacturing according to the type of equipment.
Many of the establishments in this sector often operate on networks, with physical facilities, labor forces, and equipment spread over an extensive geographic area.
Industries in the Truck Transportation subsector provide over-the-road transportation of cargo using motor vehicles, such as trucks and tractor trailers. The subsector is subdivided into general freight trucking and specialized freight trucking. This distinction reflects differences in equipment used, type of load carried, scheduling, terminal, and other networking services. General freight transportation establishments handle a wide variety of general commodities, generally palletized, and transported in a containeror van trailer. Specialized freight transportation is the transportation of cargo that, because of size, weight, shape, or other inherent characteristics require specialized equipment for transportation.
Each of these industry groups is further subdivided based on distance traveled. Local trucking establishments primarily carry goods within a single metropolitan area and its adjacent nonurban areas. Long distance trucking establishments carry goods between metropolitan areas.
The Specialized Freight Trucking industry group includes a separate industry for Used Household and Office Goods Moving. The household and office goods movers are separated because of the substantial network of establishments that has developed to deal with local and long-distance moving and the associated storage. In this area, the same establishment provides both local and long-distance services, while other specialized freight establishments generally limit their services to either local or long-distance hauling.
General Freight Trucking
This industry group comprises establishments primarily engaged in providing general freight trucking. General freight establishments handle a wide variety of commodities, generally palletized, and transported in a container or van trailer. The establishments of this industry group provide a combination of the following network activities: local pickup, local sorting and terminal operations, line-haul, destination sorting and terminal operations, and local delivery.
General Freight Trucking, Local
This industry comprises establishments primarily engaged in providing local general freight trucking. General freight establishments handle a wide variety of commodities, generally palletized and transported in a container or van trailer. Local general freight trucking establishments usually provide trucking within a metropolitan area which may cross state lines. Generally the trips are same-day return.
General Freight Trucking, Long-Distance
This industry comprises establishments primarily engaged in providing long-distance general freight trucking. General freight establishments handle a wide variety of commodities, generally palletized and transported in a container or van trailer. Long-distance general freight trucking establishments usually provide trucking between metropolitan areas which may cross North American country borders. Included in this industry are establishments operating as truckload (TL) or less than truckload (LTL) carriers.
General Freight Trucking, Long-Distance, Truckload
This U.S. industry comprises establishments primarily engaged in providing long-distance general freight truckload (TL) trucking. These long-distance general freight truckload carrier establishments provide full truck movement of freight from origin to destination. The shipment of freight on a truck is characterized as a full single load not combined with other shipments.
General Freight Trucking, Long-Distance, Less Than Truckload
This U.S. industry comprises establishments primarily engaged in providing long-distance, general freight, less than truckload (LTL) trucking. LTL carriage is characterized as multiple shipments combined onto a single truck for multiple deliveries within a network. These establishments are generally characterized by the following network activities: local pickup, local sorting and terminal operations, line-haul, destination sorting and terminal operations, and local delivery.
Specialized Freight Trucking
This industry group comprises establishments primarily engaged in providing local or long-distance specialized freight trucking. The establishments of this industry are primarily engaged in the transportation of freight which, because of size, weight, shape, or other inherent characteristics, requires specialized equipment, such as flatbeds, tankers, or refrigerated trailers. This industry includes the transportation of used household, institutional, and commercial furniture and equipment.
Used Household and Office Goods Moving
This industry comprises establishments primarily engaged in providing local or long-distance trucking of used household, used institutional, or used commercial furniture and equipment. Incidental packing and storage activities are often provided by these establishments. Specialized Freight (except Used Goods) Trucking, Local
Specialized Freight (except Used Goods) Trucking, Long-Distance
This industry comprises establishments primarily engaged in providing long-distance specialized trucking. These establishments provide trucking between metropolitan areas that may cross North American country borders.
A freight broker is an individual or company that serves as a liaison between another individual or company that needs shipping services and an authorized motor carrier. Though a freight broker plays an important role in the movement of cargo, the broker doesn't function as a shipper or a carrier.To operate as a freight broker, a business or individual must obtain a license from the Federal Motor Carrier Safety Administration (FMCSA). Freight brokers are required to carry surety bonds as well.
Freight broker services are valuable to both shippers and motor carriers. Freight brokers help shippers find reliable carriers that might otherwise be difficult to locate. They assist motor carriers in filling their trucks and earning money for transporting a wide variety of items. For their efforts, freight brokers earn commissions.
Freight brokers use their knowledge of the shipping industry and technological resources to help shippers and carriers accomplish their goals. Many companies find the services provided by freight brokers indispensable. In fact, some companies hire brokers to coordinate all of their shipping needs.
Often, freight brokers are confused with forwarders. Though a freight forwarder performs some of the same tasks as a freight broker, the two are not the same. A forwarder takes possession of the items being shipped, consolidates smaller shipments, and arranges for the transportation of the consolidated shipments. By contrast, a freight broker never takes possession of items being shipped thus in the absence of negligent entrustment, a freight broker is not normally involved as a party litigant in a cargo claimdispute, although as an accommodation, the freight broker may assist the shipper at their request and expense with filing freight claims.
NAICS Index Description
Bulk mail truck transportation, contract, local 484110
Container trucking services, local 484110
General freight trucking, local 484110
Motor freight carrier, general, local 484110
Transfer (trucking) services, general freight, local 484110
Trucking, general freight, local 484121
Bulk mail truck transportation, contract, long-distance (TL) 484121
Container trucking services, long-distance (TL) 484121
General freight trucking, long-distance, truckload (TL) 484121
Motor freight carrier, general, long-distance, truckload (TL) 484121
Trucking, general freight, long-distance, truckload (TL) 484122
General freight trucking, long-distance, less-than-truckload (LTL) 484122
LTL (less-than-truckload) long-distance freight trucking 484122
Motor freight carrier, general, long-distance, less-than-truckload (LTL) 484122
Trucking, general freight, long-distance, less-than-truckload (LTL) 484210
Furniture moving, used 484210
Motor freight carrier, used household goods 484210
Trucking used household, office, or institutional furniture and equipment 484210
Used household and office goods moving 484210
Van lines, moving and storage services 484220
Agricultural products trucking, local 484220
Automobile carrier trucking, local 484220
Boat hauling, truck, local 484220
Bulk liquids trucking, local 484220
Coal hauling, truck, local 484220
Dry bulk trucking (except garbage collection, garbage hauling), local 484220
Dump trucking (e.g., gravel, sand, top soil) 484220
Farm products hauling, local 484220
Flatbed trucking, local 484220
Grain hauling, local 484220
Gravel hauling, local 484220
Livestock trucking, local 484220
Log hauling, local 484220
Milk hauling, local 484220
Mobile home towing services, local 484220
Refrigerated products trucking, local 484220
Rubbish hauling without collection or disposal, truck, local 484220
Sand hauling, local 484220
Tanker trucking (e.g., chemical, juice, milk, petroleum), local 484220
Top-soil hauling, local 484220
Tracked vehicle freight transportation, local 484220
Trucking, specialized freight (except used goods), local 484230
Automobile carrier trucking, long-distance 484230
Boat hauling, truck, long-distance 484230
Bulk liquids trucking, long-distance 484230
Dry bulk carrier, truck, long-distance 484230
Farm products trucking, long-distance 484230
Flatbed trucking, long-distance 484230
Forest products trucking, long-distance 484230
Grain hauling, long-distance 484230
Gravel hauling, long-distance 484230
Livestock trucking, long-distance 484230
Log hauling, long-distance 484230
Mobile home towing services, long-distance 484230
Radioactive waste hauling, long-distance 484230
Recyclable material hauling, long-distance 484230
Refrigerated products trucking, long-distance 484230
Refuse hauling, long-distance 484230
Rubbish hauling without collection or disposal, truck, long-distance 484230
Sand hauling, long-distance 484230
Tanker trucking (e.g., chemical, juice, milk, petroleum), long-distance 484230
Tracked vehicle freight transportation, long-distance 484230
Trash hauling, long-distance 484230
Trucking, specialized freight (except used goods), long-distance 484230
Waste hauling, hazardous, long-distance 484230
Waste hauling, nonhazardous, long-distance
Information for the state of
We just collected the money that we were owed a lot more quickly.
Freight Bill Factoring Companies
The majority of Truck Factoring companies purchase invoices and advance cash within 24 hours, although the terms and nature of Truck Factoring can differ between industries and different financial service providers. -Freight Bill Factoring Companies
HOW I IMPROVED MY PROFITS IN ONE EVENING
Freight Bill Factoring Companies Articles
Receivables Factoring at accountfactoring.org
The Best Kept Secret in Financial Services: Freight Bill Factoring!
If you're an existing owner of a trucking business, or perhaps you're planning on starting a trucking business, then you may be interested in Freight Bill Factoring. Freight Bill Factoring helps trucking businesses, both large and small, achieve their overall business goals; but before making any final decision you must fully understand how Factoring works.
Freight Bill Factoring has become very popular with trucking businesses and is often referred to as the financial backbone of the trucking business. If you're not familiar with Freight Bill Factoring, you may not know that factoring is a financing alternative for business owners: it gives them immediate access to additional financing capital they may otherwise not have access to. The process of Freight Bill Factoring is actually quite straightforward: it involves a factoring company purchasing bill of ladings at a discounted rate. This process is a win-win situation for both the trucking company who receives immediate funds and for the broker who pays for the invoices.
Freight Bill Factoring Is Not New!
Freight bill factoring is not a new idea; in fact, it has a long, rich tradition. Most civilizations that have engaged in commerce have also engaged in factoring in one form or another. For example, business relationships during the colonial period in North America were required to make cash payments in advance against Accounts Receivable in order for the business to continue with its commercial operations, prior to their users being paid for their goods. So, they were engaged in factoring!
Factoring Specialists Have Many Services to Offer
Of course, factoring has become a lot more sophisticated over the years, and today it's focused on financial management, credit worthiness, and on collections. However, the basic concept of purchasing Accounts Receivable has stayed the same. In addition, the modern factoring company of today can do a lot more than just funding: a factoring specialist can assist clients by evaluating and setting credit limits, verifying customer's credit worthiness, and professionally managing Accounts Receivable collections. Right across North America we see factoring companies existing in all forms and serving business sectors and industries of all types; and today, many large financial institutions even have their own factoring divisions. Generally, though, factoring companies are smaller, independently owned enterprises.
Banks Step Out as Factoring Steps In
Factoring has become very popular with trucking businesses because, as most business owners can verify, commercial lenders have become increasingly inflexible, with stricter regulations and ever-changing lending criteria. This inflexibility has forced both small and medium sized businesses to search for alternative financing sources, and this is where factoring has stepped in. Factoring is a simple, workable, solution-based process, providing an alternative for trucking businesses when traditional means of financing are not available. Factoring is proving to be a great financial remedy, particularly as banks and other lenders are becoming less friendly to small business owners.
Factoring Companies Operate Worldwide
The volume of factoring around the world has today exceeded the trillion-dollar mark! Factoring companies operate on every continent and, in the last four years, worldwide factoring transactions have increased by 60%. And that's why we say that Freight Bill Factoring is the best kept secret in financial services!
We just collected the money that we were owed a lot more quickly.
Freight Bill Factoring Companies Articles
About Invoice Factoring and How to Choose the Best Invoice Factoring Company for Your Business
Most people have heard of invoice factoring, but knowing exactly how it works and how to choose the right factoring company for your business can be difficult to ascertain. We've put together this brief guide to help you understand invoice factoring and to provide you with enough information to help you make the right choice for your business.Most business-to-business (B2B)companies find it very frustrating when forced to wait for customers to pay their accounts. When payment terms are over-extended, businesses of all sizes can find themselves dealing with cash flow problems. For some customers it's industry standard to offer long payment terms, but there are other customers who demand longer payment terms simply because they can. This is where invoice factoring steps in to assist businesses.
So, how does invoice factoring work? Invoice factoring is a method of keeping a business's cash flow steady without the business being forced to take on debt or sell equity.
In this article we'll look at how the factoring process works, the benefits it offers to businesses, and we'll also determine which businesses qualify for factoring.
Explaining Invoice FactoringInvoice factoring is when Accounts Receivable are purchased at a discount price. Today, invoice factoring is one of the most popular financing methods, helping thousands of businesses grow and expand. In fact, you may be interested to know that the history of the United States began with invoice factoring! Apparently, the Pilgrims used invoice factors in London to finance their voyage to Plymouth on the Mayflower. And once colonies had been established, invoice factoring remained a popular financing method among New World traders and merchants. So, as you can see, business owners have been using invoice factoring for thousands of years. Today, Invoice factoring is still considered the safest way of obtaining the funds a business needs to grow and expand.
Basically, invoice factoring converts a business's current unpaid invoices into immediate cash; solving cash flow problems caused by net payment terms of 30, 60, and even 90 days. Without reliable cash flow a business will fail to thrive because inevitably it will fall behind on rent or payroll and miss out on great opportunities to expand the business. Invoice factoring allows management to concentrate on growth by eliminating the frustrations of unpaid accounts.
The process of invoice financing is the selling of Accounts Receivable to a reputable factoring company. Invoices, which could well be outstanding for up to 4 months, are purchased by the factoring company for up to 98% of their face value.
The three participants involved in a factoring transaction include -
-The business who issues the invoice;
-The customer, or account debtor, who owes payment on the invoice; and
-The financing company, or factor, who purchases the invoice and provides immediate cash.
I've Heard Invoice Factoring Called Other Things - What Is the Proper Terminology?
It's true, the term Invoice Factoring is used interchangeably with other terms like AR Factoring, Accounts Receivable Financing, Receivables Financing, Invoice Financing, AR Financing, and Receivables Factoring; so just keep in mind that all these terms refer to the same type of funding.
How Invoice Factoring Works
Once a customer receives a product or service from a business, they receive an invoice. With invoice factoring, the business can now "sell" this invoice to their chosen factoring company. In return, the business will receive a cash advance, somewhere between 70% and 90% of the value of the invoice. Now that the business has cash in-hand they're free to cover payroll and rent, take on new work, buy new equipment, invest in new technology, and even be on the receiving end of early-pay discounts from suppliers. Once the invoice has been paid to the factoring company the business will receive the remainder of the funds, less the agreed-upon factoring fee, which is typically based on the value and term of the invoice.
Invoice factoring results in a win-win-win situation for all three parties: the business concerned receives immediate cash on the invoice submitted, the customer enjoys favorable payment terms, and the invoice factoring company earns their fee.
Comparing Invoice Factoring with Traditional Bank Financing
The difference between invoice factoring and bank financing is that invoice factoring is not a debt, and it's this fact most businesses find appealing. As a business, you sell your Accounts Receivable to the factor and you receive a cash advance - that's all there is to it. It's up to you what you do with the funds because no debt means no restrictions.
An added benefit of invoice factoring is that it's the credit quality of the business's customers that are evaluated, which suits not-yet profitable or early-stage businesses selling to the government or established companies, yet still trying to establish themselves. The factoring rate businesses pay factoring companies is much more attractive than alternative financing arrangements that don't take into account the credit worthiness of a business's customers.
Other benefits of invoice factoring include a quick and simple application process, a higher approval rate when compared with banks and other forms of financing, and a quicker time to funding. When it comes to the size of funding, factoring companies are very comparable with banks in-so-much-as they can fund up to $10 million credit lines. The streamlined approach to invoice factoring provides businesses with much needed cash in-hand so the business can grow and prosper, meet all its financial obligations in a timely manner, still have cash to invest in up-to-date equipment, source new and bigger clients, and receive discounts for bulk buys or early payment.
Applying for Invoice Factoring is a Relatively Simple Process
Most businesses are familiar with the stress of applying for a bank loan, but applying for invoice factoring is a very simple process: it takes less paperwork and certainly much less time, and is not as stressful as trying to raise equity. Invoice factoring involves a very simple application process, eliminating the stress and unnecessary hurdles placed on small businesses trying to access finance.
Because invoice factoring provides quick access to funding, businesses find themselves in a position to take advantage of great opportunities, like expansion and accepting large orders. For many businesses who have been denied access to bank finance, being accepted for invoice factoring allows the business to continue growing and expanding. Once you've been accepted for invoice factoring, the factoring company is basically underwriting your customers to the same extent that they're underwriting your business. Of course, another bonus is that funds received from factoring your invoices can increase your available bank credit.
As your chosen factoring company, we're here to help collect on your receivables, but only if you ask us to. Following your direction, our account managers will politely but firmly chase up outstanding invoices. If your decision is that you prefer we don't speak with your customers under any circumstances, we accept that too. Invoice payments are directed to a specific account created under your company's name.
How Much Cash Will I Receive Immediately?
The amount of cash you'll receive immediately is an agreed-upon percentage of the face value of your invoices. Industry advance rates typically vary from between 70% and 90% of the face value of an invoice, which means that if you're owed $10,000, depending on the agreed-upon advance rate, you can expect to receive an immediate payment of between $7,000 and $9,000.
The remaining amount of between $1,000 and $3,000, less the factoring company's fee, will be forwarded to you once your customer has paid their invoice.
How Much Do Invoice Factoring Companies Charge?
Depending on the face value of the invoice, factoring fees typically range from between 1% and 5% per month; however, our own factoring fees range from between 1% and 3% per month. Transparency is vitally important when considering factoring fees, and businesses should be aware that invoice factoring companies who make it difficult to determine their all-inclusive fees are companies to be avoided at all cost. This lack of transparency is designed to confuse customers and they use this confusion to their advantage.
If you're unsure about the information you've received on invoice factoring you must proceed very cautiously, or alternatively, try a different factoring company. The information you receive must be clear and concise, leaving no room for doubt or confusion on your part. Another aspect of invoice factoring that you should be aware of is that there are invoice factoring companies out there who advertise rates of 1% (and even lower)which may sound very attractive; however, they make up for these low fees with a range of hidden charges.
One sneaky way these companies attract customers is to charge a low monthly factoring fee, but you'll be charged for two months if the invoice should go over by just one day.We charge invoice factoring fees on a daily basis, which means that however many days outstanding the invoice may be, this number of days will be used to calculate the fee chargeable. By this we mean that you won't be charged an extra month of fees simply because your invoice was outstanding for 31 days instead of 30.
Please Explain How Invoice Factoring Can Help Grow My Business
Today, businesses are choosing invoice factoring over merchant cash advances or bank term loans simply because it's the lowest risk option there is. The fact is, the sale has been completed and the invoice confirmed, so the only thing remaining is for the customer to pay the invoice. Provided you have confidence that your customer will pay your invoice in a timely manner there's nothing to worry about. However, with a bank loan, monthly interest payments can devastate small businesses, start-ups, and even large businesses. And, with bank loans, they either amortize or the total amount is due at the end of a specific period. This kind of debt stress can be devastating for business owners, who are often placed in the position of deciding whether to make bank interest payments, pay rent, or make payroll.
With invoice factoring, because you receive cash in-hand for your invoices, there's no stress, and you're free to grow your business in whatever way you see fit. For many businesses the only negative has always been waiting to receive payment on invoices, so now there'll be no more waiting and you'll have cash in-hand to meet your own financial obligations.
What Kind of Businesses Qualify for Invoice Factoring
Fortunately, it's actually quite easy to apply for and be approved for invoice factoring. With banks and other lenders, profitability, annual revenue, and credit scores can be obstacles to being approved for finance, but these factors typically don't apply with invoice factoring companies.
There are three things that invoice factoring companies are usually looking for -
-The business must have government or other business customers;
-Business invoices must be unpledged to other loans and be due and payable within 90 days. This means that you can't have another loan where you're claiming the same invoice as collateral; however, if you do have another loan it must be subordinated (rank after)the invoice factoring company's claim to your accounts receivable;-There should be no history of serious legal or tax issues connected to your business. Note that some factoring companies use a "time in business" or minimum credit score to approve or deny applications; however, we do not.
How Can I Choose the Right Invoice Factoring Company for My Business?
You've made the decision that invoice factoring may be a good fit for your business, so what should you do next? There are so many invoice factoring companies out there to choose from, so how do you determine which one is the right fit for you? The answer to this question is - very carefully! You need to know exactly what you're looking for. To start with, you're looking for an invoice factoring company that offers more than just funding. There are many factors out there claiming to be the most technologically advanced, the fastest, and the easiest to use, but be cautious. You need to receive good customer service from your factor and be very wary of high fees. Some factoring companies are forced to charge higher fees in order to cover the losses they experience because they underwrite poor quality clients.
Excellent Customer Service is a Must!
It's very important that a good working relationship be established between the invoice factoring company and the business because, without it, businesses can be left confused as to why their credit facility has been reduced or why certain invoices have been rejected. Great customer service and a personal touch is vitally important when it comes to invoice factoring. If your questions are not being answered in an honest and open fashion, or your calls and emails are not being responded to in a timely manner, then find another factoring company.
Freight Bill Factoring Companies Articles
Business Is Booming but Your Company's Cash Strapped!
A business needs good cash flow for many reasons, and many businesses have learned the hard way that business can be booming but they can still suffer from cash flow problems. There are many scenarios where a business might urgently require access to cash: it could be due to the sudden growth or expansion of a business, a major transaction may need to be expanded, perhaps there's a need to purchase equipment or even to employ more personnel.
Interestingly, research shows that many businesses (both small and medium-size) fail, not because business is bad, but because they experience difficulties when trying to meet short-term financial responsibilities. So how can a growing and profitable business get into serious financial trouble, or even go broke? It seems so contradictory, but on closer examination you'll see that it's not surprising at all.
Many Businesses Experience a Cash Flow Dilemma
It's so easy for a business to get into a situation where they have a cash flow problem: you only need one or two larger accounts to default on payment, or to take an additional 60 or 90 days to pay, and now you've got a cash flow problem!
Traditionally, business owners have depended on conventional lending sources for a business Line of Credit, and this often includes short-term Bridging Finance. But there are also many people in business who've used their personal credit cards for business-related expenses. Once business owners have exhausted traditional means of funding, the process of acquiring extended financing can become a time-consuming, trying, and often impossible task.
Fortunately, today, we have a viable and effective alternative for business owners to get through cash strapped periods, particularly during periods of expansion and business growth. This innovative form of financing is known as Factoring; it's also sometimes referred to as Asset Based Lending or Accounts Receivable Financing.
Factoring has become a workable and realistic solution for many businesses, particularly when cash flow is uncertain and threatens the viability, or even survival, of the business.
How Does Factoring Work?
Basically, when a business has credit-worthy accounts receivables, the factoring process provides the business with an instant cash injection on those receivables. So, sometimes, when a lender says 'no' to a business, a factoring company may say 'yes', thus offering the much needed cash injection that so many businesses require to move forward.
Factoring companies understand the financial needs of their trucking clients and react very quickly to provide them with the professional, personalized, hands-on attention that they require. Freight Bill Factoring is actually a very simple process: it provides a business with instant cash flow in order to satisfy its cash needs, which in turn enables the business to grow and prosper.
It works like this! Your company has quality accounts receivables, and needs a cash boost. A factoring company may purchase just one, or a group of your receivables, and in return will immediately give you up to 100% (less fees applicable) of the face value of these accounts. Once the customer invoice has been paid in full the balance is forwarded on. Yes, factoring costs more than other means of lending, but factoring clients believe the benefits far outweigh the costs.
The Benefits of Factoring
Possibly the greatest benefit of factoring is the short turnaround time, because factoring companies don't have a lengthy loan approval process, unlike banks and other lenders. This means that, with factoring, trucking business owners can have money in-hand by the end of the same working day!
In order to receive approval as a factoring customer, a trucking business must first-of-all be a reputable trucking business, and secondly, it must have credit-worthy customers. Once a business has been approved for factoring, funding will be provided on the same day. It's important to note, also, that ongoing financing is only limited by the amount of receivables available for purchase.
In the last decade we've seen factoring grow very quickly, and today it's become a financially feasible alternative for many trucking companies. Many trucking companies have stated that Freight Bill Factoring has made it possible for them to process orders and undertake loads from brokers that would otherwise have been impossible because of a lack of financing. Freight Bill Factoring is here to stay, and it clearly has a place in today's business environment. Because of factoring, a trucking company can expand its customer base, increase loads, and even survive a seasonal slump. Thanks to Freight Bill Factoring, many businesses have been able to expand and grow, and easily survive in what has become a very competitive industry.
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Factoring Companies - Benefits
Factoring companies offer a wide variety of benefits to businesses. Factoring companies conduct financial business by allowing a business to sell its invoices to a factor (also known as a third party business or individual.) The price that the business charges is discounted in order to sell the invoices that are currently held, and make the cash that is immediately needed for any type of expenditures involving the business. A business that has immediate cash needs, but has no cash to pay for the expenditures that has occurred often ends up going under and eventually shutting down completely. This takes a lot of jobs away from people, and can leave you working for someone else, no longer running for your business. No one wants to take this large step down from the current place that they are in. A business owner has worked incredibly hard to get to where he or she currently is, and does not deserve to have their business become obsolete. This is where the factoring companies can be a huge help to businesses.
Keep in mind that factoring companies do not use the same process as invoice discounting. Instead, invoice factoring (also called the "Assignment of Accounts Receivable" by the FASB and GAAP) is the sale of invoices, instead of invoice discounting which involves collateral in order to ensure that the individual who took out the invoice discounting loan will pay it back. Factoring is not a loan; instead, factoring is the sale of invoices in order to get immediate cash. There is no loan in the process of factoring, and you will never have to pay the money back.
Since the invoices that are sold are also called receivables, the entire process of factoring is usually called the sale of receivables. Receivable factoring is much better than trying to take a loan out from the bank. Banks charge interest on any type of loan, and although there is usually collateral, it can put you in even more debt than you currently are. In addition, factoring companies are never going to give you a loan. When a factoring company funds your discounted receivable, he or she will choose to buy the receivable, giving you cash immediately. This cash can pull your entire business out of the hole that it is currently in. Instead of taking a loan out and getting yourself further into debt, factoring allows you to simply sell your own invoices and get back most of the money that you originally put into them. Although this may seem like a bad process since you are selling valuable invoices, it is important to do, as the invoices are completely useless if your entire business goes under. Instead of trying to take a loan out to keep all of your receivables (invoices) factoring companies benefit you directly by giving you the cash you need.
Benefits of Factoring Companies / Invoice Factoring / Receivable Factoring
When you are in a bind and really need money in order to get through the next few months, it can be very troublesome. Although the first thought in most peoples' minds would be to visit the nearest bank as soon as possible and take out some kind of loan, this is very dangerous. Although the loan may hold your business over for the next few months, it is simply delaying the same money crunch you already had. Unless your business is making an incredible amount of money, the bank loan that you took out has increased in the price that you must pay bank. Interest on a bank loan is how the banks make money and survive. Many loans have a very high interest rate, and if you are unable to pay the loan back in a short amount of time, you are going to be in more of a money crunch than you originally were in. In order to pay back the loan, you would have to make a large amount of money in a very short time, which is unlikely if you needed to take out the loan in the first place.
Rather than bothering with bank loans that will inevitably put you back in the money hole that you were in when you took it out, factoring companies are available to help you. A factoring company is a place where businesses can place their invoices for sale at a discounted price, which will allow them to receive immediate cash. As aforementioned, this money does not need to be paid back, as it is not a loan. Keep in mind, you are not selling your business. You are selling invoices in order to keep your business growing. You will be able to get more invoices in the future when your business is back up and running, but if you do not sell these invoices, you will never be back up and running.
When you are in a money crunch, don't put yourself back in the money hole that you are in by taking out a bank loan. Utilize factoring companies in order to get immediate cash that will help you get back up and running without putting a loan on your business.
Freight Bill Factoring Companies Articles
Receivables Factoring at accountfactoring.org
Important Points to Remember When Choosing Your Factoring Company
Now that you've decided that factoring would be a solid business decision for your company, the next step is to find the perfect factoring company for you. Once you start looking you'll discover that there are many factoring companies (or 'factors') in the marketplace, and this is the perfect situation for you as a potential factoring client.
But it can also be confusing, because now you have to find the right factoring company to suit your business's needs. To assist you in making the right decision we've listed below the main issues that should be considered when choosing a factoring company.
Factoring Fees and Terms
Before making your final decision and entering into a factoring agreement, check out the fees applicable and the terms of the contract. Both of these can vary a lot, depending on the factoring company and the industry it's serving. When you start your research you'll discover that some factoring companies charge a flat fee: this fee is, in effect, a certain percentage of the total value of the customer invoices you sell to them; whilst others have additional charges to cover the general costs of doing business - such as, money transfers, shipping, collateral, and so on.
Ensure that the factoring company you're considering working with is transparent and upfront with you about its fee structure. In addition, you may want to consider a long term contract with your factoring company if it includes flexible rates or a price break. If you're receiving competitive offers from other factoring companies or you have increased factoring volume, you'll discover that many factoring companies will be prepared to adjust their rates. A one year contract is the industry standard for most factoring agreements. Generally, unless you give your factor a 60 or 90 day notice, your factoring contract will automatically renew.
What's the Difference between Recourse and Non Recourse Factoring?
It's important that you understand the difference between recourse and non recourse factoring prior to choosing your factoring company, because you need to know what the best fit would be for your company and your customers. So, with non recourse factoring, all of the credit risks for the collection of the invoice belong to the factoring company; while recourse factoring means that, with you being the client, you'll ultimately be responsible if the factoring company is unable to collect payment on your customers' invoices.
There are benefits to recourse factoring, and perhaps the main benefit is that it's less expensive than non recourse factoring. If you have a recourse agreement and the customer defaults on payment, it doesn't automatically mean that you'll be asked to settle the debt out of pocket. Generally, what happens is that the factor will hold back a portion of either future cash advances or payments being held in reserve, with the money being placed in an escrow account awaiting settlement of the debt.
Our suggestion is that you find a factoring company that offers both recourse and non recourse factoring, because not all of your customers will be good candidates for recourse factoring. An experienced factoring company working with a strong credit team can also behelpful in ensuring you're working with good customers: this will relieve some of the pressure of being stuck with bad debt.
Experience and Capital: The Two PreRequisites
Your company should be looking for a factoring company with experience in your industry, including the capital structure to fund your business as it continues to grow. Once you start researching factoring companies you'll discover that there are a lot to choose from; however, many of these are recent start ups with limited experience. Prior to signing any factoring agreement, do your research and look into the history and background of the factoring company concerned, especially its ability to provide financial services in your area of expertise.
The idea with factoring is that, as your company grows, the funding of your customer invoices will grow with you.Research the factoring company's client base and their capital structure. What's a typical account size? What's the factoring volume of their largest client? Is the factoring company limited to how many debtors it can handle? In general, factoring companies that have been serving your industry for many years will usually be able to offer your business the best deal.
Additional Factoring Services
There are many more benefits to factoring than simply increasing your company's cash flow. Because the factoring company will be handling the collection of your customer's invoices, your company will be saving time and resources. A good factoring company will also be able to evaluate companies in your industry and provide credit information. In short, your factor will ensure that you experience excellent customer service. You'll be matched with your own representative who'll be able to address any questions or concerns you may have about your factoring account.
So, when researching factoring companies, look for a factor who not only offers additional products but provides a high level of customer service that will help your business grow by assisting you in making smart business decisions.
Freight Bill Factoring Companies Articles
The Difference between Accounts Receivable Financing and Factoring
Today, it's not as easy for businesses to access finance as it was in past years, and more companies are being forced to look for alternative, non banking financing options in order to access the capital they require to help their business grow.
Two of the more popular tools available to cash strapped business owners are Accounts Receivable Financing (A/R Financing) and factoring. Some business owners believe these two are the same, but there are, in fact, some small yet significant differences.
What Is Factoring?
Factoring is when a commercial finance company, also known as a factor or factoring company, purchases a business's outstanding accounts receivable. At that time, the factor will typically advance the business somewhere between 70% and 90% of the invoice's value. Then, once the invoice is collected from the customer, the remaining balance - minus a factoring fee - is released to the business. The factoring fee could range from between 1.5% and 5.5%. It's calculated on the total face value of the invoice and depends on how many days the funds are in use and other aspects, like the collection risk.
When a business has a factoring contract they can usually choose which invoices they want to sell to the factor: it's not generally an all or nothing process. Once the factor has purchased an invoice they become responsible for managing the receivable until the account has been paid. Essentially, the factor becomes the business's accounts receivable department and credit manager, analyzing credit reports, performing credit checks, mailing invoices, and documenting payments.
What Is Accounts Receivable Financing?
Accounts Receivable Financing is more similar to a traditional bank loan, however there are some key differences. Bank loans are secured with collateral; which might be real estate, the business owner's personal assets, or plant and equipment; whereas Accounts Receivable Financing is backed by the business's assets related to the Accounts Receivable. When a business has an Accounts Receivable financing agreement, a borrowing base is established at each draw against which the business is able to borrow money: this would typically be between 70% and 90% of the qualified receivables.
Between 1% and 2% is typically charged as a collateral management fee against the outstanding amount, and interest is only calculated as and when the money is advanced. An invoice must be less than 90 days old in order to count towards the borrowing base, and the finance company must deem the business credit worthy. There may also be other conditions to fulfil.
So, you can see that there are many similarities between Accounts Receivable financing and factoring; however, one is the sale of an asset (receivables or invoices) to a third party, while the other is actually a loan. In many ways, though, they do act similarly. Below we've listed the main features of each so you can determine which would be the best fit for your company.
Accounts Receivable Financing
' Generally, Accounts Receivable Financing is not as expensive as factoring;
' It can be easier to move from this type of financing to a traditional bank line of credit once a business becomes bankable again;
' Typically, a minimum of $75,000 per month is required in sales to qualify, so this type of financing may not be available to small companies;
' Due to the fact that the business will be required to submit all of its Accounts Receivable to the finance company, this type of financing can be less flexible than factoring.
' It's quite easy to qualify for factoring, and factoring is the ideal solution for start ups and financially challenged companies;
' Because businesses can decide which invoices they want to sell to the factor, factoring offers more flexibility than Accounts Receivable Financing;
' The company is able to track total costs on an invoice by invoice basis because factoring has a simple and straightforward fee structure.
Today we see both Accounts Receivable Financing and factoring as traditional sources of financing; effective when traditional bank financing is not an option. Factoring can carry a business through a period when an immediate cash input is required.
Somewhere between 12 and 24 months most companies are generally able to repair their financial situation and once again become bankable. However, some companies in certain industries continue factoring their invoices indefinitely.An example of this is the trucking industry, which relies heavily on factoring for cash flow injections.
Freight Bill Factoring Companies Articles
Invoice Factoring; The Best Way to Grow a Temp Staffing Agency
When temp agencies are struggling with cash flow problems they typically have two options; the first option is to apply for a business loan from a bank or other lender and hope they achieve a favorable result. Their second option is to use invoice factoring, so in this post we're going to discuss why invoice factoring could be their best choice.
Many businesses in many varied industries are discovering that invoice factoring is the ideal way of addressing cash flow issues, and this is also true for temp staffing agencies. In fact, it may be even more true for temp staffing agencies because these agencies don't receive payment from clients until such time as their job vacancy has been filled and the selected applicant has completed a period of work. It's not surprising, then, that temp staffing agencies often struggle with cash flow issues!
How Factoring Can Help Temp Staffing Agencies With Cash Flow
Temp staffing agencies are required to use their own finances to pay for the necessary advertising in order to place their job candidates. The client is only invoiced once the temp agency has located the perfect applicant and that person has actually worked, which can involve a long period of time before being paid. And when they are paid, they're often paid on a per-hour basis, determined by the number of hours the successful applicant has worked. In the meantime, the temp staffing agency still has its own financial obligations, like rent, payroll, advertising costs, office supplies, and so on. All these expenses must be paid by their due date, which can place an agency in a short-term (sometimes long-term) financial crisis.
Temp Staffing Agencies Must Meet Their Own Financial Responsibilities
Like any other business, temp staffing agencies can't postpone their own financial obligations, so they need access to money. Rent must be paid, utilities must be paid, and their employees need to be paid on a regular basis. All business offices require supplies and money must be available to advertise job openings, so it's understandable that waiting to be approved for a bank loan may not be a practical or even feasible option. These temp staffing agencies need access to money, and the sooner the better. That's why we suggest that invoice factoring may be the ideal solution for resolving a temp staffing agency's cash flow problem.
How Factoring Works for Temp Staffing Agencies
When any business decides to negotiate an invoice factoring program to generate instant cash, the business may, in many cases, secure up to 92% of the total value of their invoices within 24 hours! Note that if this is the first time the temp staffing agency has worked with a factor it could take between four and seven days to establish a factoring program. Either way, the agency's cash flow problems will be over, and they can proceed to conduct and grow their business.
Many temp staffing agencies are affected by cash flow problems, sometimes only occasionally, but we strongly suggest all agencies learn about factoring and how it works, just in case the need for immediate cash should arise. Invoice factoring has become a very popular financing option for many businesses, particularly those who need an urgent cash injection. Most times, money will be advanced within 24 hours once the agency has established a relationship with a factoring company.
Invoice Factoring is NOT a Loan!
Another bonus of invoice factoring is that it's not a loan. Basically, all the temp staffing agency is doing is accessing money that's already owed and payable to them. Factoring simply provides a means for the agency to access this money when it's most needed
Now, temp staffing agencies don't need to approach banks and other traditional lending authorities, hoping and praying they qualify for a loan. All that's required is for the agency to provide the factoring company with copies of the invoices they wish to sell, together with time sheets for each employee. Then, within 24 hours the agency will receive a cash deposit into their bank account. No more cash crisis! The temp staffing agency will now have funds to meet their regular financial obligations without the need to take on any further debt.
Freight Bill Factoring Companies Articles
Medical and Healthcare Factoring
Receive Payment Today! No Waiting Weeks for Reimbursement!
It's certainly no secret that Medicaid, Medicare, HMOs, Workers' Compensation, and other private insurers can take a LONG time to pay your invoices! But now there's good news for healthcare professionals! Now you don't have to wait weeks, sometimes months, to collect on your medical receivables. If you're a healthcare professional and you provide medical or healthcare-related services of any type, we're here to help you!
The Difference between Healthcare Factoring and Medical Factoring
Healthcare factoring and medical factoring are phrases that are often used interchangeably, probably understandably, but there is a difference between these two. The difference is that healthcare factoring applies when there's no third party payer involved, while a medical factoring company is used when there is a third-party payer involved.
Healthcare Factoring and Medical Receivables Factoring are available for the following healthcare providers -
- Group and Sole Practitioners
- Physical Therapy and Rehabilitation Facilities
- Durable Medical Equipment
- Medical Coding Services
- Medical Billing Services
- Medical Supply Companies
- Medical Staffing Companies
- Medical Transportation
- Medical Transcription Services
- Ambulance Providers
- Nursing Homes
- Imaging Facilities, such as providers of X-Rays, MRIs, CT Scans, and so on
- Home Healthcare Providers - both Medical and Non-Medical,
- And more! Healthcare Receivables Factoring
Generally, healthcare receivables are associated with customers who are not third-party payers. Some common healthcare sectors include medical staffing companies, medical transcription services, medical billing and coding services, and medical supply companies. When these vendors utilize healthcare factoring they're free to enjoy the benefits of an almost unlimited line of credit - all based on the services they've provided. A simple explanation of factoring healthcare receivables is as follows-
- When work has been completed, the healthcare vendor will invoice their customer.
- These customers may include nursing homes, hospitals, medical offices, and so on.
- Next, the vendor will forward a copy of the billing documentation to the healthcare factoring company.
- Within 24 hours, sometimes even less, the factoring company will deposit money into the vendors bank account. The amount deposited will generally be around 85% of the gross value of the invoice.
- The factoring company handles collections on behalf of the vendor, and will retain 15% while awaiting payment.
- Once the invoice has been paid in full, the factor will release the 15% - less their factoring fee - back to the vendor.
Medical Receivables Factoring
- Regardless of whether you're billing Medicaid, Medicare, HMOs, Blue Cross/Blue Shield, or third-party insurance companies, we have the perfect factoring solution for you. When you start factoring your medical claims you'll achieve instant benefits by receiving upfront capital; while the factor may have to wait months for your customers to settle their accounts. A simple explanation of factoring medical claims is as follows-
- The healthcare provider submits claims to the third-party payer, as usual.
- A copy of completed paperwork is then submitted to the factoring company.
- Within 24 hours, sometimes even less, the factoring company will deposit money directly into the medical provider's bank account: the amount deposited will typically be around 85% of the net collectable value.
- Once the claim has been paid in full by the third-party payer, the factoring company will release the remaining 15% - less their factoring fee.
Freight Bill Factoring Companies Articles
Receivables Factoring at accountfactoring.org
Freight Bill Factoring: The Best Way to Achieve Your Business Goals
Freight bill factoring is not a secret, but many businesses are still unaware of the benefits available to them by factoring their business invoices.
If you're planning on starting your own trucking business, or perhaps you already own a trucking business, you may well have heard of freight bill factoring. Many trucking companies confirm that freight bill factoring has been entirely responsible for helping them achieve their overall business goals. So, let's discuss freight bill factoring and how can it help you grow your business.
How Freight Bill Factoring Assists Trucking Companies
It was recently reported that freight bill factoring has become the financial backbone of the trucking industry, and that's not a surprising statement because factoring provides financing capital that businesses would not otherwise be able to access. The freight bill factoring process is a very simple one: your Bill of Ladings is purchased by a factoring company at a discounted rate. The trucking company receives immediate funds and, because the money received is not a loan, the trucking company is free to use these funds as they see fit. No more cash flow problems!
Is Freight Bill Factoring a New Financing Concept?
No, it's not new. In fact, freight bill factoring has been around for a long, long time. Almost every civilization engaged in commerce has used some type of factoring. Businesses actively engaged in factoring during North America's colonial period when they made cash advances against accounts receivables to enable the business to carry on with their commercial operations. Of course, factoring has become quite advanced over the years and is now more focused on financial management, collections, and credit worthiness; however, the basic idea of purchasing accounts receivables remains the same today.
Today, factoring companies have a lot more to offer than just funding: they now have factoring specialists who assist their clients by evaluating their customer's credit worthiness, defining credit limits, and managing their accounts receivables collections in a professional manner.
Right across North America we're seeing all forms of factoring companies servicing business sectors and industries of all types. It's interesting to note that, today, many large financial corporations have their own in-house factoring divisions; however, factoring companies are typically independently-owned enterprises.
Commercial Banks Are No Longer Supportive of Small Business
Commercial banks today are operating under very strict regulations with constantly changing lending criteria, thus making it very difficult for business owners to apply for and be accepted for a bank loan. Their inflexibility has left small and medium-sized businesses out on a limb, searching for alternative financing sources. Fortunately, factoring provides these businesses with the financing solutions they're looking for.
Freight bill factoring offers a workable solution for these businesses when conventional financing methods are simply not available. And now that banks and other lending institutions have become less friendly to small business owners, factoring as a financing remedy is looking much more attractive.
Interesting statistics show that the volume of factoring around the globe has now exceeded the trillion-dollar mark, with factoring companies operating right around the world. In the last four years alone, there's been an increase in factoring transactions by 60%.
Factoring companies provide businesses with the working capital they need to operate and grow their businesses and, because factoring is not a loan, there really are no disadvantages to factoring.
Freight Bill Factoring Companies Articles
A 'Factor' is a third party commercial financial company who purchases the Accounts Receivable from businesses: this transaction is known as 'Factoring'. Factoring exists so that businesses can receive a quick injection of cash, as opposed to waiting the 60 or 90 days for customers to pay their invoices. Factoring is also known as Accounts Receivable Financing, and Invoice Factoring.
The majority of factoring companies purchase invoices and advance money to the business within 24 hours; however, the nature and terms of factoring can (and do) differ among financial service providers and industries. Depending on your customers' credit histories, your industry, and other specific criteria, the advance rate on your invoices can range from 80% to as high as 95%. The factoring company not only collects on your invoices; it also offers back office support to your business.Once the factoring company has collected on your customer's invoice,you'll be paid the balance of the invoice - less the factor's fee for assuming the risk. The primary benefit of factoring is that businesses no longer need to wait anywhere between one and three months for a customer to pay their accounts: they now have access to cash in hand so they can operate and grow their business.The Advantages of Factoring
There are a few reasons why factoring has become an invaluable financial tool for many businesses, including start ups. As mentioned above, the main benefit is that businesses can now receive a quick boost to their cash flow because factoring companies, in general, will provide cash on accounts receivable within 24 hours. This resolves the problems businesses experience with short term cash flow, and in many ways this injection of cash can help to grow a business. Besides handling your customer collections, factoring companies can also evaluate your customers' payment and credit histories.Other benefits of factoring include:
' It can be customized to a business's needs and managed to ensure that capital is available when it's needed;
' It's not based on your own business or credit history: it's based on the quality of your customers' credit;
' It's not based on your company's net worth: it provides a line of credit based on sales;
' There's no limit to the amount of financing, unlike conventional bank loans;
' This financing will not show up as a debt on your balance sheet, because it's not a loan.Who Uses Factoring?
Companies of all different sizes, including start ups, use factoring; and today factoring has become common business practice across many industries. Factoring is now widely used in the transportation industry, including manufacturing, textiles, trucking, oilfield services, wholesale and distribution, and staffing agencies. Interestingly, factoring receivables is practiced in many countries around the world and has a long history of success.
Can I Factor? My Company's New, with No Financial History
Yes, you can! In fact, factoring has become an excellent tool for start up companies because no company credit history or balance sheet is required. It's not really your company's finances that the factoring company is concerned with; they'll base their financing on your customers' payment histories and credit scores.
What Percentage of My Invoices Should I Factor?
The answer to this question really depends on the unique needs of your business. Some companies only factor invoices for customers who typically take a long time to pay, while others factor all their invoices. The receivables that a company can factor range anywhere from a few thousand dollars to millions of dollars each and every month.
What's the Difference between Factoring and a Bank Loan?
' The difference between factoring and a bank loan is that you're not assuming any debt with factoring because it's not a loan;
' With factoring, there's no emphasis on your balance sheet - it's all on your customer's invoices;
' In addition, a bank loan is typically one lump sum, whereas factoring provides a steady flow of funds;
' Factoring companies can also help improve your company's balance sheet by assisting with your credit and collection functions;
' A bank loan adds to your debt, whereas factoring converts receivables (an asset) into cash (another asset);
' And of course, bank loans can be very difficult to get because they're limited by your balance sheet.How Do You Start the Factoring Process?
The factoring process can be very simple to set up. The customer will be asked to complete a short application form, and may be required to follow up with other reports and documents.
Recourse and Non Recourse Factoring: What's the Difference?
' With Recourse factoring the client is ultimately responsibility for the payment of the invoice; whereas
' With Non Recourse factoring, the factoring company accepts responsibility for the risk of collecting the invoice.It's important to note that some factoring companies over offer both types of factoring - recourse and non recourse.
What Are the Contract Terms and Fees Applicable with Factoring?
There are different fee structures with different factoring companies: some factors charge an overall factoring fee which is determined by the creditworthiness of your customers and the monthly volume of invoices; while others charge additional fees to cover shipping, money transfers, and other costs associated with doing business. Before signing with any factoring company make sure you understand the fees and terms applicable to your contract. Also note that most factoring contacts are renewed annually.
Do I Need Credit Insurance on Debtors?
Insurance is not typically required, but in specific circumstances it may be.
Freight Bill Factoring Companies Articles
Oilfield Services Factoring Services
Running a company in the oilfield services industry is no easy business, especially with payrolls to meet, equipment to purchase and deadlines that must be met. The sheer complexity of combining the geological research and modeling, imaging and exploration and finally the drilling to see whether oil is really present can take a lot of investment before any payoff can be seen.
For those who own a Frac Sand Hauler for example, the efforts that must be put in to start such as business can be considerable. But arguably the biggest challenge is paying the expenses as the invoices come in. A Frac Sand Hauler often has expenses that must be met immediately, but their invoices can take up to 60 days before they see the money.
What follows is an interview with Ray McClerand, a man who owns a Frac Sand Hauler business and ran into the same difficulties that many new companies of his type face. How Ray overcome some of the challenges in paying his bills through oil service factoring are explained in the interview.
"Welcome Ray, I'd like to know first why you decided to start up a Frac Sand Hauler company and how you prepared for the challenges it created."
Ray McClerand (RM): "I've been in the oil business for the past 15 years or so working on different jobs from roughneck to foreman to deskwork for different companies. A few years ago I saw the potential of having a Frac Sand Hauler business in this area and got together with a couple of partners to create a company. We sat down, went over the details and decided that this would be a real good time to build a business that was serving a particular need in this industry."
"So, I take it you created a business plan and took out the appropriate loans in order to purchase the equipment and hire the personnel necessary to get your company started?"
RM: "Exactly. Because I had been around this business for a while, I understood what was needed in terms of personnel and equipment. Plus, I had some contacts with others in the business that needed the type of services that a Frac Sand Hauler provides, so I felt that there was some real potential to make a profitable business work."
"How did it go over the first six months or so?"
RM: "At first, we were really thriving as my contacts had lined up some business my way. Our loans covered the first six months or so of operations and we were doing quite well with the business we had. My partners and I were certainly happy and everything was going good when something really strange happened."
"Could you elaborate on what you mean by "strange"?
RM: "Yes, after the first five months or so I started getting requests to have our company work with several other businesses in the area. This would mean having to expand our company through buying new equipment and hiring more people. But we did not have the cash on hand to make such a move. We were getting invoices from the businesses that we worked with, but it was taking up to 2 full months before we actually got the cash."
"So, you were making enough money to expand, but you didn't have it on hand because of the invoice system?"
RM: "You got it. Add to that our initial money from the loan was running out and we needed to start paying it back as well. I knew that if we didn't expand and accept the new business that others would step in and we would lose that money. So, we were in a real pickle until I heard about oil service factoring companies."
"Tell us a bit about oil service factoring and how it helped you out?"
RM: "Well, one of my partners had heard about factoring companies, so we checked it out and decided to go with one that was best suited for our needs. A factoring company buys our invoices with cash so we have money on hand to pay our bills and do what we need accomplished immediately. The factoring company then collects the money from the invoices when they become due. It's really been a win-win for what we do."
"That's interesting. I wonder if you could you explain a little further just how factoring has helped your company?"
RM: "Sure, instead of having to wait up to 60 days before we could collect on the invoices, we were able to have the cash on hand immediately to purchase some new equipment and hire some more people to expand our business. This meant that we could accept the new offers that other businesses were providing for us and not having to pass. I cannot say enough about how factoring really benefitted us when it came to expanding our business."
"So, it seems like factoring really paid off for you. Do you still use factoring today?"
RM: "Yes we do. Although for the most part we still cash our own invoices, whenever we need money quickly so we can buy some new equipment or expand our business a little further, we go back to the factoring company and cash in our upcoming invoices. It really has worked wonders for our company."
"Tell me, what would have happened if factoring was not an option?"
RM: Frankly, I don't know how we could be in the position we are today without factoring. In this business, you have to take advantage of new opportunities quickly because there are other companies out there who will step in if you don't. Basically, I don't think we would be anywhere near the company we are today if it had not been for factoring.
There is little doubt that Ray's company would not be where it was without oil service factoring that allowed him to expand his company when he needed. For those in the oil industry, having your invoices cashed immediately by factoring companies allows greater flexibility so you can grow your business a lot more quickly and take advantage of opportunities.
You Can Find More Information at https://truckingbroker.org
and at http://smallbusinessfactoring.org