Today, a staggering variety of goods and foodstuffs are produced by American factories and farms, ranging from dairy and meats to furniture, cars, books, and kids’ toys and more. But it is not enough to merely produce these items; producer and shippers will make use of the United States’ robust transportation and logistics network to get their goods delivered safely and on time to warehouses, retailers, and more. This, in turn, supports the large transport industry, and countless smaller companies (and some larger ones) make up this vital industry today in the United States. These carriers have the proper vehicles to get the job done, and they may take on jobs from shippers to deliver goods in exchange for charging invoices. Smaller carriers may have cash flow problems while waiting for a customer’s invoice to be paid, however, so invoice advance loans are often used to smooth things out. Factoring financing is done with freight factoring services such as Advance Business Capital and others of its kind. Why get an invoice advance loan? These invoice advance loan can save carriers from bankruptcy when a fair deal is made with factoring companies.
What Carrier Companies Do
Most carrier companies in the United States today, aside from a few larger ones, are all on the smaller side, and together, they add up to constitute the large American transportation network. These small companies most often have a modest fleet of trucks to offer to shipper clients, and some trucks are specialized for certain cargo such as toxic waste, liquid nitrogen, canisters of natural gas, or even dry ice. Reefer trucks have refrigerated trailers for carrying cold goods for grocery stores such as dairy and meats. Larger carriers, meanwhile, may have trains and seagoing vessels to offer for large loads going across a large distance. Altogether, American carriers offer a total fleet of 12 million trucks, freight cars and locomotives, seagoing vessels, and more. Trucks are the most numerically common, as they are most affordable cor carriers to purchase and shippers to make use of. That, and trucks can go to many places that trains or ships cannot reach.
These smaller carriers make their profits when they charge invoices to their shipper customers, but even if these invoices are paid on time, carriers may have to wait 60-90 days for that payment. And of course, sometimes invoices are paid late. Carriers have their own expenses in the meantime, such as vehicle maintenance and fuel, crew salaries, and financing marketing campaigns. Smaller carriers simply do not have deep enough cash reserves to fall back on during this time, so they will need loans in order to avoid cash flow problems or even bankruptcy. This is when the carriers make use of invoice advance loans from factoring companies. How does this work?
The Business of Finance Factoring
These are money lending businesses who primarily deal with business clients such as smaller carriers who need loans to smooth out their cash flow. When a carrier has completed a shipment for a shipper customer and charged an invoice, that carrier may then start looking around for invoice factoring companies who can offer invoice advance loans to them. Once the carrier finds a factoring company that agrees to do business with them, they make a deal. The factoring company will purchase the rights to collect 100% of the invoice’s value when it is paid by the carrier’s customer. At this point, the factoring company will give the carrier company a substantial up-front loan, often around 70-80% of the invoice’s total value. This timing is essential for smaller carriers, since they often literally cannot afford to wait a few months for an invoice to be finally paid. With this up-front money, the carrier can cover its own expenses and smooth out its cash flow.
Later, when the carrier’s customer does make its full invoice payment, the factoring company will collect 100% of that invoice’s value as arranged earlier. Now, the factoring company gives the carrier another, smaller percentage of the money, and all the loans add up to 95-98% or so of the invoice’s value. The factoring company will keep the remaining 2-5% of the invoice value as the fee for its services.