When was the last time your family faced a gap between the amount of money needed to pay its bills and the amount of funds that you had available?
If you are like most Americans, it is likely that you have often, and perhaps very recently, not had all of the money that you needed to pay your bills. Extending this one family example to businesses, there are many times when bills come due before income is received. From small boutique owners to grocery store chains, there are many cases when owners will need to pay for the costs of products before these items will be sold. Factor in the cost of employee wages and other expenses and you begin to see the reasons that many businesses need to have access to advance business capital. One industry that especially relies on the need for gap loans to help them meet the expenses they have before they realize the income they are owed is the trucking industry.
Transportation Factoring Companies Provide Important Services
Commercial factoring companies offer their services to clients in a number of industries, but in a time when the delivery of goods is so essential, it is the trucking factoring companies that may be the busiest. From the delivery of everything from groceries to personal protection equipment, the entire nation is relying on the services of the transportation industry. Having to purchase new trucks, hire new drivers, and all of the other added expenses of habit to expand so quickly, however, comes at a cost. And this cost is not something that many businesses can cover. As a result, many trucking companies find themselves relying on commercial factoring companies to meet their current financial needs.
By definition, factoring companies help small businesses bridge invoice payment gaps with upfront payments as high as 90% of the original invoice. These bridge loans obviously come with fees and interest, but they ar the only way that many companies can meet their expenses to employees while they await their income from customers. Consider some of these facts and figures about nth economy of the nation and the many ways that it relies on the services provided by commercial factoring companies:
- You simply have to visit a local grocery store and find that some of the items that you need are not available to realize the role that the transportation industry plays in this country. The latest research, in fact, indicates that as many as 12 million trucks, rail cars, locomotives, and vessels move goods over the transportation network.
- Approximately 5.9 million commercial motor vehicle drivers operate in the U.S., according to the Federal Motor Carrier Safety Administration.
- Given that there are nearly 28 million small businesses in the U.S., it is likely that many of them are struggling to meet the current economic impacts caused by the Coronavirus pandemic.
- During the last decade, bankruptcies in the U.S. increased to 25,227 companies in the second quarter of 2016, from 24,797 companies in the first quarter of 2016. Knowing that there is so much less spending today, the number of bankruptcies in the year 2020 could be devastating.
- Sending paper invoices is 57% more expensive than sending an electronic invoice, and the delivery of paper invoices also increases the amount of time that passes before payments are made.
- Invoice factoring is a type of accounts receivable financing that converts outstanding invoices due within 90 days into immediate cash for a small business.
- The factor advances most of the invoice amount, typically between 70% and 90%, after examining the credit-worthiness of the billed customer, according to an article printed in the Wall Street Journal, . When the bill is paid, the factor remits the balance, minus a transaction, also known as the factoring, fee.
Commercial factoring companies offer invaluable services to many kinds of customers, but it is important to note that these services are especially important to many small businesses. And given the economic challenges of the nation today, it is important to realize that these financing options will continue to be important in the future. Finding a way to survive during the recent economic challenges may require more companies to access bridge financing.