Trucking is a unique industry because your product is moving the products of others. You move the country, ensuring that everything from food to clothing to furniture to mail reaches its destination on time. Because you fill such a unique and vital position within the economy, your business structure and revenue stream is sharply different from other companies. Freight bill financing is a unique concept, designed for trucking companies and used by many of the biggest transportation companies in the nation.

What Is Freight Bill Financing?

Although similar to accounts receivable financing or factoring, freight bill factoring is custom tailored for transportation. Once your freight bill is ready, you are eligible for financing based off of it. A non-traditional lender and transportation specialist like Crestmark will purchase the bill from you, paying you a portion of it immediately. Once the account clears with your client, you get the rest minus an administrative fee. Freight bill factoring can be traditional or discount depending on your needs.

Why It Works

You know how volatile the transportation industry can be. There's often a lag time between invoice and receipt of payment. In addition, shifting conditions like gas prices and unavoidable delays from weather can lead to a dramatically variable revenue stream. Financing can help smooth out the operation, ensuring that you have the cash you need when you need it. 

Accounts receivable financing is one option for businesses whose working capital needs exceed what can be obtained through traditional term loans from conventional banks. Whether your enterprise is new, your funding demands unusual, or you're simply having trouble getting credit in a tight economy, accounts receivable financing can be a good choice. But what kind best suits your business? There are two main options: traditional A/R financing or discount financing.

Traditional, Non-Recourse Accounts Receivable Financing

Traditional A/R financing begins with your potential financier checking your customer's credit. This should happen before you invoice to determine approval. Once your client is approved, the financier (known in this case as the factor) will purchase the invoice from you. In this case, the factor actually assumes complete responsibility for the invoice because they now own it. That includes ensuring payment even if your customer is unable to pay.

Discount, Recourse Factoring

Discount factoring is similar to traditional accounts receivable financing. It too involves borrowing against unpaid invoices, but in this situation the factor does not actually purchase the accounts or assume liability for them. Advantages of this system include lower fees and in some cases faster turnaround and greater availability of funds.

Both of these options allow for flexibility and funding that might not otherwise be available. Both also involve your factor working directly with your client, a proven system that shortens the time between invoice and receipt of payment.

To learn more about accounts receivable financing, contact one of Crestmark's experts. We can help you understand the details and differences between discount/recourse and traditional/non-recourse factoring and select the right option for your business.   

Invoice factoring allows businesses to collect cash from invoices faster. In some cases, companies may even be able to recover funds from a transaction even if the buyer becomes unable to pay. The premise behind invoice factoring is that accounts receivable can actually be sold. The company that purchases your accounts receivable is known as a factor, hence the term invoice factoring.

There are two types of invoice factoring, The first, non-recourse, involves the complete sale of the invoices. In this situation, the company assumes all responsibilities related to the invoice. You receive cash immediately in exchange for this sale. One of the advantages of this option is that the factor may actually take on the risk of non-payment, meaning that you receive cash even if your client can never meet the bill.

Recourse factoring is the other type of invoice factoring. Also known as discount factoring, it provides much of the same financing options as non-recourse, typically at less of a cost. Both types of factoring require an exchange of information and discussion before approval. You will need to provide information about your top customers to the factor and provide a figure for how much funding you need from each.

One of the biggest benefits that applies to both non-recourse and recourse factoring is that they are flexible. You can finance as much or as little of your accounts receivable as permitted based on client credit and as needed for your business in its current state. This inherent adjustability is rare in term loans and more rigid financial instruments.

Crestmark is proud to provide invoice factoring for a variety of industries. If you would like to learn more about how this non-traditional financing technique can help you make payroll, fund an expansion, or just keep your business running smoothly day to day, our staff will be happy to talk with you.