Cash flow – the life blood of a trucking operation – is under more pressure than ever as shippers continue to push out pay dates to their brokers, giving brokers limited options other than to do the same to their carrier partners.
That pressure is felt more acutely by the 80 to 85 percent of the trucking industry that doesn’t happen to be a major truckload or less-than-truckload (LTL) company. For carriers not part of that upper 15 percent, the answer has been to lean increasingly on factoring companies to purchase their invoices, for a fee, in exchange for faster payment.
Ten years ago, there was a negative connotation attached to factoring. A carrier was looked upon as weak if it had to rely on these companies as a financial crutch. Now, factoring is considered just another cost of doing business.
“What we see in the market today is that about 43 percent of carrier payments are made through a factoring company to address not only cash flow issues, but for administrative support as well,” explained Paul Saindon, Vice President at Bender-Carey Capital, which provides carrier and vendor payment services to the supply chain industry.
“Carriers’ operational costs are real-time. They have to pay their drivers, make truck payments, pay the insurance, fuel the trucks – and they’re not getting paid for 30-45 days. Factoring allows them to pay for today’s work with tomorrow’s receivables.”