A discussion about the ongoing business needs of a freight broker could encompass many different things. But there are three business needs that every freight broker is consumed with each and every business day; the need for shippers, the need to expand the carrier network and the need for cash flow. Each part of this equation is extremely fragile, but all three are necessary in keeping a freight broker in business. The ability of a broker to grow is based on how well he can balance these three business elements and still keep everybody happy at the same time.
Funding the ongoing operations of a freight broker can be a frustrating activity if the broker is unaware of the options he has to choose from. While it makes sense that a network of carriers is not going to remain intact if the carriers are not paid, it should also not fall on the broker to pay carriers out of his pocket just to keep them happy. Part of being able to run a successful brokerage business is to understand the trends and needs of everyone you do business with. When you understand the financial habits of carriers and shippers, then you can find funding arrangements that suit your business well.
Without the needs of shippers, a freight broker would not have any business to conduct. But the challenge that shippers present is that they traditionally pay their invoices several months past the due date. A good freight broker will always have problems maintaining cash flow when his shippers pay their invoices 30, 60 or even 90 days late. It becomes even more difficult when the shipper tries to contract more business from the broker while there are past due invoices in the system. A broker cannot turn regular customers away, but he also cannot afford to finance the shipper’s activities out of the broker’s pockets.
This problem is especially evident with smaller freight brokers and start-ups who are counting on invoiced sales for their growth. When shippers do not pay their bills on time, these smaller brokers run the risk of going out of business before they even get a chance to really get started. Most start-ups have funding to last them the first few months. But when past due invoices stretch beyond that start-up period, then there is no cash to cover carrier bills and that is when problems begin. Late payments can be one of the most frustrating parts about owning a freight brokerage business.
The fastest and most efficient way for a freight broker to establish a good reputation among carriers is to pay carriers on or before their invoice due dates. Carriers need cash to operate and they do not like to have to borrow money from banks to keep the rigs on the road. Specialty carries such as long haulers or heavy load haulers have very high maintenance costs and they need a constant supply of cash to keep their vehicles properly maintained and on the road. Cash flow is one of the most important thing to a carrier and it relies on its brokers and customers to supply that cash flow.
Once again, the smaller brokers and start-ups run into problems establishing a reliable carrier network when they cannot get their cash flow issues figured out. Funding a carrier network is a huge responsibility that requires a constant supply of cash. When shippers make it difficult for brokers to develop a stable cash flow, then it becomes extremely difficult to expand their carrier networks. The brokers may have no problems finding shippers to provide the loads needed to generate revenue, but finding the carriers to haul those loads can be extremely difficult if the funding is not there.
There are many ways to look at how a freight broker receives funding for ongoing business needs, but it all boils down to outstanding invoices. As shippers pay their invoices, that cash gets added to the broker’s account and becomes part of the available funding to pay for ongoing operations. But what happens when the shipper has a large load shipped and that invoice sits unpaid for months? The broker still has to pay the carrier and the funds have to come from somewhere. The broker could try bank lending or he could try to pay the carrier out of his own pocket. Either way, it winds up being a bad business situation for the broker and it has a negative effect on business.
One of the challenges that freight brokers have is that they traditionally do not acquire assets that can be sold or used as funding collateral. A broker does not buy the rigs that the trucking company uses and the broker does not buy any of the specialty equipment that some haulers use for larger loads. The broker is a liaison that matches up shippers with carriers and never actually touches the product to be shipped. If the broker does not have the cash to cover his financial needs and he has maximized his bank lending limits, then it could look like he has run out of ways to fund his continuing operations.
The thing that all freight brokers need to realize is that they already have the assets necessary to allow a stable and reliable cash flow. Those outstanding invoices are assets that can be used as collateral when the freight broker teams up with the right accounts receivables funding company. Accounts receivables funding is the process of turning your aging report into a cash flow report and relieving all of your cash flow issues. It is a process that can take place instantly and it will utilize all of your approved outstanding invoices as the cash needed to pay carriers without bank lending or using broker profits.
Commerce Commercial Credit is a leader in accounts receivable funding for small to medium sized businesses. We have years of experience in setting up the kind of funding programs that allow small freight broker businesses to grow and help start-ups to get beyond the initial funding stage. We will put our resources to work for you in providing you with the reliable funding you need to meet all of your ongoing business obligations. We work quickly, because we know that time is of the essence for all freight brokers. We can have your approved account up and going in three to five business days, and we can advance you cash from approved invoices in 24 hours or less.
The process of accounts receivables funding can turn outstanding invoices into cash quickly. We will advance you the face value of your outstanding invoices, minus our lender’s fee, directly into your company bank account. We have several different kinds of flexible funding programs that we can use to get your cash flow moving and make sure that you are able to keep your carrier network intact. We understand that freight brokers require cash to keep their businesses operating at peak efficiency. That is why we have the financial professionals who can turn your outstanding invoices into cash immediately.
Contact Commerce Commercial Credit today and get the process started. You can give us a call, or you can utilize our online application to submit your information. We do not charge any set-up fees and we do not have any per month or per invoice minimums. We have extensive experience in the trucking industry and we want to put that experience to work for you by making sure that you always have the cash you need to fund all of your ongoing business obligations. Let Commerce Commercial Credit be the financial business partner that helps your brokerage business to succeed and grow.