Transportation companies are usually very active in the cash business. To grow your business beyond the proverbial one-man business, you need access to company capital or finances. Most financial institutions are unwilling or unable to provide business loans to small transport companies because of their financial problems.

How To Finance A New Or Developing Freight Company

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The biggest problem for most carmakers and brokers is cash flow. This problem arises from the fact that most transportation companies and intermediaries have direct costs but delayed revenue. In other words, they had to pay for the driver, repairs, and fuel quickly.

On the other hand, customers pay their bills 30 to 60 days after service. This time difference between costs and revenues forces auto companies to dive into reserves to cover operating costs.

And that's the problem because few companies have the capital reserves needed to cover ongoing costs for up to 60 days while growing their business.

The obvious solution to this problem is to cut the time it takes for customers to pay you. This is easier said than done as customers can happily pay up to 60 days. This helps them with their cash flow. One strategy is to encourage customers to pay quickly, i.e. B. Discount if you pay within 10 days.

This is a good strategy when your customers are ready to work with you. You're still at the mercy of a customer who can reconsider the discount and let go. For many, a better solution is to use corporate finance.