The Benefits of Transportation Factoring

Freight Factoring: Is it Really Niche Factoring and How Does it Differ from Asset Based Lending?

2008-01-11T14:53:00.000-08:00

When the question of “Niche” factoring is discussed, someone often asks if Freight Factoring should be considered a “Niche” as we do other specific markets such as the garment industry. Freight Factoring should be considered “Niche Factoring” if for no other reason than there are currently so many factors concentrating on just the Transportation Industry.

With deregulation of the Transportation Industry in the 80s there has been an explosion of new Carriers, Brokers and Freight Forwarders. The number of carriers has risen from roughly 5,000 licensed carriers to nearly 50,000 and Brokerages have increase from approximately 500 to over several thousand nationwide.

These new and emerging companies are generally not bankable and yet have a tremendous need for working capital financing. This has led to the rapid growth and expansion of Factoring Companies and Asset Based Lenders (ABL) with Factoring Divisions.

The distinguishing feature of Freight Factoring from other forms of factoring is a heavier reliance on the quality and size of the individual invoices as opposed to the experience and financial strength of the company. It is also for a service rendered as opposed to a product delivered with its potential for offsets, damage claims and non-performance. Also the required documentation in the industry is consistent and effective for evaluating and tracking the principals involved, the terms agreed upon and completion of the service.

In Freight Factoring, Factors generally rely on the honesty of their factoring client and the quality of the receivables. In Asset Based Lending you have less control over the quality and performance of the receivables and must rely more heavily on the financial strength, performance and information supplied by the company and its management team. Underwriting is much more detailed, time consuming and based on obtaining valid and informative financial information.

With certain Companies that have both a Factoring Division and an Asset Based Lending Division you often find that Start-up Companies or those that are currently financially challenged may start out with a factoring arrangement and then migrate into an A/R Line of Credit as they mature, grow and the credit risk diminishes.

Yes in our opinion, Freight Factoring is a “Niche” Industry and yes it is certainly different than Asset Based Lending. The differences are great enough that if companies do both, they usually separate the two into individual divisions staffed by employees with a different set of skills and experience.

For more information visit: www.cafreightfactoring.com

Freight Factoring Companies Reduce

2008-01-10T16:55:00.000-08:00

Small businesses, by definition are generally considered to be those with 50

employees or less. They do not have the resources to tackle entire industries or markets. Nor can they survive many mistakes because of their limited financial resources. The fact is that mistakes cost money; lost money has a very negative impact on cash flow; and cash flow is the life blood of any business, especially the small business.

Consequently, a small business’ management team needs to be very accurate in their strategic thinking. Accurate or precise thinking will lead to fewer mistakes. Fewer mistakes should improve or at least benefit cash flow and a strong cash flow reduces vulnerability.

This all sounds good but where should strategic thinking begin? First you have to know your business well enough that you can target and segment a market where the needs of the customer match your skills and services. Without customers there is no business, just a dream in someone’s head. Once you know that you can generate a customer base, you have to know how to price your services. What is it worth and can you sell it to your potential customers? If you can, you’ve passed the first of two hurdles.

Next you have to have an operating system that allows you to effectively solicit, secure, deliver, follow-up, bill and collect your accounts receivable. But before you do, you need to take at least three other critical elements into consideration.

First you must have enough start-up capital to sustain your business until it is generating revenue and, hopefully a profit. I n our experience we have found that close to 75% of all new businesses do not have enough start up capital. That is why 75-80% of them fail in the first three years of business. It is a business owner’s nightmare, they are selling their product or services, generating sales but don’t have the cash to pay vendors and sometimes even their employees. Why? Because all of their cash is tied up in the equipment and accounts receivable.

The second and third critical elements are tied into the conversion of accounts receivable into cash. That conversion is dependent upon good initial credit decisions on extending credit and then the ability to efficiently follow-up or collect for the service rendered or product delivered.

That is why factoring has virtually exploded as one of the more popular sources of CASH, CREDIT INFORMATION, AND COLLECTIONS in the financial industry. A quality factoring company will first purchase your accounts receivable for CASH giving you instant liquidity and the ability to grow and expand your business.

Secondly, a factor generally has a vast credit information data base including information on many of the businesses you may want to deal with including how promptly they pay their bills. The factor essentially becomes your credit department doing credit checks and assisting you in setting realistic credit limits. Once the factor purchases your invoice and bills your customer they use their STAFF (So you won’t have to use YOURS) to diligently pursue the collections of YOUR INVOICES.

Don’t get me wrong, factoring companies cannot take the place of good management and like any other vendor or business whose service you contract for, they are an expense and therefore you should use them and their services intelligently and effectively.

By intelligently, I mean take advantage of all of their services and their years of credit experience. By effectively, I mean you must use the liquidity factoring creates to grow your business by increasing sales, and most importantly, profits. As I have heard factors say so many times to potential clients, “Factoring is a cash flow solution, not a profitability solution unless you use our services wisely”.

Factoring expenses will reduce your revenue because they are an expense. They can also increase your revenue through increased sales opportunities and a reduction in bad debt. Factoring costs can also be offset by having the ability to take advantage of early vendor payment discounts. Plus by outsourcing the bulk of your credit and collection work you can reduce the personnel and credit information costs significantly.

Factors are not just a source of converting accounts receivable into cash, their value added services are often essential to the long-term success of many small businesses.

For more information visit: www.cafreightfactoring.com

The Benefits of Transportation Factoring

2007-06-07T14:33:00.000-07:00

OK,
We all know that running out of money is hard. It's especially hard when you have a job to do. I understand that. I want to introduce you to Transportation Factoring and why it can work for you.
I am Bill Stewart, the president of Capital Associates and I help people like you with cash flow issues.
Here is what we can do together, so let's get started:

Up to 95% Advances:

At Capital we are committed to bringing you one of the highest advance rates in the industry. For our qualified applicants Our Small Fleet Factoring Program offers you a 95% advance rate to provide you with as much working capital up front as possible.

24 hour Funding:

Immediate Cash flow to meet your needs on a CONSISTENT basis. No more waiting 30 to 60 days to get paid. We will send you money directly to your bank account.

Faxed/Scanned Invoices Accepted:

Do you need you money in a hurry? Speed up the advance process by sending us your FAXED invoices. As an alternative to mailing your original invoices and waiting days for your advance, fax them to us and we will advance you $$ within 24 hours.

On-Line Reporting:

Access to your management reports helps you make the good decisions you need to grow your company. To name a few, you will have access to A/R aging reports, paid reports, factor reports and customer lists that we prepare for you.

On-Line Credit Checking:

Our Online Database is an extensive resource at your fingertips. Ensure good turn time, lower your risk of taking loads from slow or non-paying customers. You will be able to Credit Check your potential customers and increases your productivity with immediate access 24-7. There is no extra charge to credit check a customer.

No Application fee:

No obligation to partner with our company, send in your application today with no application or start up fee’s. You will have an answer to your needs at no cost to you within hours.

Very Competitive Rates:

We are determined to keep Our Rates Low and Our Customer Service High. We offer two types of rate structures, Variable and Fixed. We custom design a program to fit your specific needs; we have something for everyone. Variable Rates can start as low as 1.35% and fixed rates as low as 1.75%.

Full Service Credit Department:

Our Credit Department provides accurate and up to date credit information on customers you want to do business with. They provide Credit Monitoring and Updating by gathering credit information from a variety of credit sources.

When you want to do business with a new customer, we conduct bank and trade reference checks as well.

Billing Follow up Services:

We do all the billing follow up for you. From the time you fax us your paperwork, your account manager is hard at work, saving you time and money by following up with your customers. Virtually no more collection calls – this is taken care of for you. We even fax account statements to your customers. These methods are designed to identify potential payment problems and eliminate delays in payment. This allows you and your staff to spend more time generating revenue and less time collecting it.