Invoice finance allows your transport business to have a cash flow that can help it grow. It’s a way of leveraging against outstanding invoices to release working capital. You can release up to 95% of all outstanding invoices, giving you a boost to your businesses cash-flow, whilst having the security of the funding. You can also credit insure all your invoices to protect against defaults in payments.
Running a transport, haulage, or courier business often incurs cash-flow issues due to high asset finance costs that include trucks, vans, and machinery.
With the added pressures of daily expenditure such as fuel and wages, compounded with 30, 60, or even 90-day payment terms, cash flow can become problematic. That’s why the largest businesses in Bristol and the UK use invoice finance to support their business.
Transport invoice finance, sometimes referred to as transportation invoice financing, is a financial solution designed specifically for businesses in the transportation and logistics industry. This type of financing addresses the cash flow challenges that can arise when these businesses face delays in receiving payment from their clients. It allows transportation companies to access funds more quickly by using their outstanding invoices as collateral. Here’s how transport invoice finance typically works:
1. Invoice Factoring: In this method, a transportation company (such as a trucking company or logistics provider) sells its unpaid invoices to a factoring company. The factoring company advances a significant portion of the invoice amount, often around 80-90%, to the transportation company immediately. The factoring company then takes over responsibility for collecting payments from the transportation company’s clients. Once the clients settle the invoices, the factoring company pays the remaining balance to the transportation company, minus a fee. The fee covers the cost of financing and credit control services.
2. Invoice Discounting: With invoice discounting, the transportation company uses its unpaid invoices as collateral to secure a loan or line of credit from a financial institution. Unlike factoring, the transportation company retains control over the collection process and client relationships. The financial institution advances a percentage of the invoice amount (typically around 80-90%), and the transportation company is responsible for collecting payments from clients. Once the clients pay, the transportation company repays the loan or credit line with interest.
Transport invoice finance is valuable for transportation and logistics businesses because it helps them maintain a steady cash flow, meet their financial obligations (e.g., fuel costs, maintenance, and payroll), and invest in the growth and operations of their companies without being hindered by delayed client payments. It’s a flexible financial tool that aligns with the specific cash flow challenges of the transportation industry, where operating