What is transport finance?
Transport finance is a form of asset-based lending that helps businesses in the haulage and transport industry with the working capital funding they need for growth. This particular industry faces challenges that can dry up a company’s cash flow, effectively blocking the company from acquiring more assets or covering expansion costs. These challenges are mainly from the increasingly high costs of fuel, normal operations, as well as vehicle insurance and maintenance.
The industry also suffers from prolonged and lengthy waiting periods that can last up to three months before customers make invoice payments. Transport finance helps to free up the cash tied up in unpaid invoices, thus helping businesses in the industry to boost their cash flow and working capital.
Invoice finance for the transport industry
Transport finance is an invoice finance solution that is ideal for transport and haulage firms, couriers and distributors who are not inclined to put up their vehicles as collateral in order to receive funding that will improve cash flow. These firms have a viable and convenient alternative that allows them to use their accounts receivable or unpaid invoices as collateral and receive up to 90% of the net invoice value in as little as 48 hours. This input from the finance provider can dramatically revive cash flow pattern enabling businesses to keep functioning in an optimum state.
Advantages of transport finance
- Adequate cash flow funding that can be quickly accessed within 48 hours
- Transport firms have eligibility based on customer creditworthiness, not the company’s
- Thoroughly checking customer credit history safeguards the business from bad debt
- Providers assume control of the company’s ledger for efficient credit management that lessens administrative burdens
How does transport finance work?
During haulage and freight transactions, invoices are sometimes issued after delivery has already been made. However, firms have to wait for up to three months before the invoice is finally paid. With many similar transactions, businesses end up with significant chunks of cash held up in their account receivables. This is money needed to pay drivers, refuel vehicles, and other necessary daily business expenses.
To avoid the disastrous cash flow crunch that can result from such situations, transport firms can obtain Transport Finance. By ‘selling’ a single invoice or more, the firm can receive a maximum 90% advance of the net value of the invoice. The cash can be readily accessed from the finance provider within 24 hours minimum. Effectively, firms receive working capital tied up in unpaid invoices. Hence, instead of slowing down business to accommodate cash flow shortfalls, they can still fund their daily and growth operations while they wait for customers to pay.