Freight Factoring Financing for Quebec Transportation Companies

The transportation industry in Quebec is diverse and bustling with small and mid-sized carriers and brokers. Most of these companies handle the transportation needs for large corporate shippers and customers. While working with large clients has a number of advantages, large clients can also create financial problems for trucking companies they work with.

Slow payments cause cash flow issues

Large customers often  negotiate 30- to 45-day payment terms into their shipping contracts. Your freight company ships the goods today but then must wait four to six weeks to get paid. This wait can get expensive because few companies can wait this long for payment and take on new clients at the same time.

This problem is the most common and challenging financial dilemma for growing transportation companies in Quebec.

Build a cash reserve

One way to mitigate this problem is to build a cash reserve so that you have a resource to pay for company expenses while waiting for your freight bills to pay. The problem is that building a cash reserve takes time and is difficult for small trucking companies that are trying to grow quickly. As a result, this solution is not always feasible.

A better solution: improve cash flow

Another way to solve this problem is to use freight factoring to complement your existing reserves. Factoring works by financing your invoices. This solution accelerates your revenues and improves your cash flow, providing your company with the funds it needs to cover expenses. In Quebec, factoring has been growing in popularity as a solution that can help transportation companies with the cash flow problems created by slow-paying invoices.

How does freight factoring work?

Freight factoring offers a simple way to solve the problem. Your company works with a financial intermediary who advances funds for your freight bills from creditworthy customers. This solution provides immediate working capital to pay important expenses such as fuel, repairs, and driver payroll. And, when used correctly, factoring can help you offer terms to customers because it minimizes how long you wait for your invoices to get paid.

Most factoring transactions are structured to finance your invoices in two instalments. The first instalment, commonly referred to as the “advance,” covers about 90% of your gross outstanding invoices and is provided shortly after you submit your freight bills for financing. The second instalment, commonly called the “rebate,” covers the remaining 10% (less any fees) and settles the transaction.

For more information, please read “What is freight bill factoring?

Costs

The cost of the service varies based on your size and specific risk profile. Most Quebec-based transportation companies can get invoice financing for a cost of 1.5% to 3.5% per 30 days.

Competitive advantage

When used correctly, freight bill factoring can provide your company with a competitive advantage. The most important advantage is that you can offer payment terms to clients, thereby minimizing the worry about the consequences for your cash flow. Additionally, the factoring line adapts to your growing sales and provides coverage, as long as the invoices have good credit – allowing you to grow your business and secure new clients with confidence.

Easy to get

A freight factoring solution is relatively easy to get. It’s available to companies of all sizes, from large fleets to owner operators. It’s important that your trucking company work with shippers and brokers that have good commercial credit because their credit backs the transaction.

Additionally, your company should not have serious tax or legal problems. Lastly, it should be managed by individuals who have experience in transportation.

Get more information

We are a leading factoring company in Quebec and can provide you with high advances at low rates. For information, get an online quote or call (877) 300 3258.