Although the economy is recovering from a recession, for many freight carriers and brokers the current environment does not feel like an economic recovery at all. New business is harder to come by and cash flow pressures have increased as customers are paying their invoices slowly. Having tight cash flows is a very common problem in the industry, and leaves companies in a precarious position. This is because small carriers have many obligations - such as trucks, fuel and drivers - that need to be paid periodically and few can afford to wait for slow paying customers.
One way to solve this problem is to start requesting faster customer payments. This can sometimes work, especially if you offer your shippers a discount for paying early. Offering 2% for a payment in 10 days or less is quite common. The problem with this strategy is that you are still at the mercy of your customer who may - or may not - pay quickly.
A second way to solve this problem is to get conventional business financing such as a loan or line of credit. While a line of credit would certainly help address this cash flow problem, they are very difficult to obtain in this environment. Banks are notoriously risk averse and will usually demand strong collateral, a long track record and impeccable financial statements before providing financing. The problem is that few, if any, small carriers (or brokers) will meet this criteria. Read More...