Transportation companies are at the heart of the Australian economy and play a vital role in every sector. 

But in an industry where margins are tight, rising fuel costs and extended payment terms can stretch working capital. It’s not unusual for large clients to require up to 60-day net terms to pay for a haul. 

Waiting this long to receive payment for an invoice can stop you from reinvesting in your trucking business. It can even cause a cash flow gap that prevents you from taking on new contracts. 

That’s why many transport and trucking companies turn to Invoice Finance. 

This guide will explore what transportation Invoice Finance is and how it works. You’ll learn everything you need to know if this type of financing is right for your business. 

Why Transport Businesses Need Invoice Finance

In an ideal world, every client would provide payment within a couple of days of receiving an invoice. Being able to access funds quickly allows you to cover the costs of the job and receive your profit. 

But most shippers and commercial clients pay on net terms. So you have to wait 30+ days for your outstanding customer invoices to be paid. 

During this period, your transportation company has to pay for your drivers, fuel costs, and the upkeep of your vehicles. 

For a larger transport company with lots of capital, this can cause cash flow issues. However, for an owner-operator business, it could mean you’re unable to take on new contracts and afford to keep your truck on the road. 

Despite playing a huge role in keeping the country moving during the COVID-19 pandemic, the transport sector was hit hard by late customer payments. The late-payment average for the transport industry increased by 500% between August 2019 and August 2020.

One of the best ways to get back in control of cash flow is transportation Invoice Finance

What Is Transportation Invoice Finance?

Transportation Invoice Finance, also known as freight or transport factoring, is a funding solution that helps transport companies to bridge the gap between raising an invoice and receiving customer payment. 

You can use unpaid customer accounts receivable invoices as collateral for funding. Instead of waiting 30+ days to receive payment, a trucking company can submit the invoice to the lender and get a cash advance of up to 85% of the invoice value within 24 hours. 

This fast funding means the business can pay drivers, cover fuel costs, and reinvest faster. 

Once the customer has paid the invoice, the funding provider releases the remaining balance of the invoice, minus the fees for the facility. 

Unlike a traditional bank loan, Invoice Finance helps businesses within the transportation industry release capital from within the business rather than take on new debt. 

How Does Transportation Invoice Finance Work?

Transport Invoice Finance is a flexible solution that can be tailored to meet the needs of your trucking company. It speeds up your ability to access funds after you complete a haul and raise an invoice. 

There are two main types of transportation Invoice Finance. 

Invoice Factoring

Invoice factoring, also known as transportation factoring and Debt Factoring, is a solution where you use your outstanding invoices as collateral for fast funding. You receive up to 85% of the invoice value as an upfront cash advance. 

When you submit the invoice for factoring, you transfer the responsibility for collecting the customer payment to the factoring company. Once your client pays, you receive the remaining balance of the invoice less fees. 

Invoice Discounting

Invoice Discounting works similarly to factoring, but with one key difference. Once you submit the invoice for financing, you retain the responsibility for collecting the outstanding invoice.

This can be beneficial if you don’t want your customer to know that you have used their unpaid invoice as collateral for financing. In most cases, Invoice Discounting is a confidential funding arrangement. 

Both transport factoring and discounting enable you to unlock the value in your accounts receivables and put it to work to grow your business.

Learn more about the types of financing in our guide, Invoice Discounting vs Factoring?.

Benefits of Transportation Invoice Finance

Whether you’re an owner-operator or a national haulage firm with routes all across the country, every trucking company could benefit from getting paid faster. 

There are three main ways that transportation Invoice Finance can support your business and be a catalyst for growth. 

      1.Cover Cash Flow Gaps

Transport companies are more likely to experience cash flow gaps than most businesses. Commercial clients and shippers often have extended payment terms of 60+ days. Wages, fuel, and vehicle costs need to be paid much sooner. This gap between cash inflows and outflows can be a recurring problem, especially with rising fuel costs.

A transportation Invoice Finance facility can help solve this issue by smoothing over cash flow gaps. You can access funds quickly to cover overheads and take on new routes. 

      2. Take on New Opportunities

Accessing capital tied up in your accounts receivables can help you fund new opportunities. For example, you can take on drivers, upgrade equipment, or bid for routes with larger clients. 

The amount of funding you can access grows in line with sales. As you take on more clients and larger contracts, you can access more funding. You don’t have to worry about how it will impact cash flow or continually renegotiate limits with the bank. 

Transportation Invoice Finance provides the capital and confidence to expand and grow your logistics company. 

     3.Fast and Flexible Cash Flow Funding 

Invoice Finance is much faster and more flexible than a traditional bank loan. Setting up a facility is straightforward and requires minimal paperwork. Once the funding is in place, you can get a cash advance within 24 hours of raising an invoice. 

You can choose from a short-term facility with no lock-in or a longer-term factoring facility with account management and collections included. There’s also the option of Selective Invoice Finance, where you can choose to fund a single invoice or a single customer. 

Predictable cash flow and funding available when you need it can be a huge asset to your business. 

Read our case study to see how invoice and Equipment Finance helped NSW transport business Computertrans grow from an owner-operator small business to an industry leader. 

How To Qualify for Transportation Invoice Financing?

The approval process for transportation Invoice Finance is much faster than dealing with banks. Unlike a traditional business loan, you can still qualify for Invoice Finance if you don’t have a long trading history or a perfect credit score. 

If your need additional financing to level up your transport business, you may find that Equipment Finance is the right solution. Equipment Finance can help you fund the purchase of new vehicles to expand your fleet. 

You can get funding to cover up to 100% of the upfront cost and spread the repayments over a more extended period. Equipment Finance and Invoice Finance can be combined to expand your fleet and grow with predictable and stable cash flow.

How ScotPac Helps Transport Companies

With the disruption of the global pandemic, the transportation industry has played a vital role in keeping the country moving. But freight and logistics firms are the first to feel the impact of rising fuel costs and extended payment terms. 

Here at ScotPac, we know the challenges that transportation companies face and what they need to succeed. We’ve worked with transport firms of all sizes, helping them get the funding to thrive and grow. 

Give us a call on the number below or use our simple online enquiry form, and our team of transport and logistics lending specialists will be in touch. We can guide you through your options and tailor a funding solution for your business.