When you order something online or by some other method, it either has to be delivered directly to you or to a store where you can pick it up. And when you shop in a store, all the merchandise there has been delivered from distant manufacturers and warehouses. Nearly 12 million trucks, rail cars and other shipping vessels move that merchandise each year. The logistics business is a multi-billion-dollar one, but most of the companies involved in it are small. For every UPS or FedEx, there are multiple small businesses helping move goods. And these small businesses can struggle to make ends meet as they wait for payment from much larger vendors. One of the biggest problems they face is a dearth of cash to pay their own bills and meet payroll. There are some ways to get around this.
One of the most common ways companies get cash to pay their bills is with a line of credit. This is essentially an open loan from a bank or finance company. You have a maximum limit and and can borrow from the line at any time as long as you are below the limit. This is a better option than a loan because you can borrow the money in increments as you need it and don’t have to borrow it all at once. You also get the flexibility of making minimum payments rather than having a fixed payment you have to meet.
Not every company can get a line of credit, either because they are too small, their revenue is too unreliable or their credit record is bad. In such a case, another way to get cash is through invoice factoring. Invoice factoring, also called invoice funding or factoring financing, is essentially the practice of getting a loan against your accounts due. Say a company owes you $30,000 but won’t pay you for 90 days. Freight factoring companies will loan you anywhere from 70-90% of that amount up front, then they get the $30,000 when the invoice is paid. Getting an invoice loan from freight factoring companies can be more expensive than a bank loan or line of credit, but it does have its benefits. It can be more flexible, and since the loan is based on specific invoice amounts, you are less likely to be unable to pay it back.
Freight broker companies and other firms in the transportation industry can face a number of challenges, and having options to get cash when needed can make it easier to meet those challenges and stay in business. Whether it’s taking out a line of credit or working with freight factoring companies to get small business factoring, having cash to meet financial obligations is necessary.