Non Recourse Factoring Helps Truckers

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Non recourse factoring benefits Riviera Finance trucking clients when freight broker Network F.O.B. announces in an email that they are going out of business.  For many other truckers, this is bad news because it leaves then with unpaid freight bills.

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Unfortunately, this burden of unpaid freight bills is not removed from a trucker if they have decided to sell their invoices to a recourse factor. The carrier will still be responsible and probably have to buy back the invoices in 90 days. This can be of great concern to the small trucker, because it might not be affordable to them.

There are options to try and collect on unpaid freight bills. A trucker can file on the $75,000.00 surety bond, but this will be quickly depleted. Another option is for the trucker to make a claim to the shipper for payment as the carrier of record, but this is a challenging process. An attorney? Costly. A collection agency? Expensive. A write-off? Likely.

There is another choice to eliminating your credit risk for unpaid freight bills and that is by choosing a non recourse factor. By selecting a non recourse factor they assume the credit risk upon purchase of the invoice. The carrier then obtains immediate cash flow on the invoice and also eliminates credit risk.

Trucking companies choose not to go to a non recourse factoring because it is considered more expensive. This become a calculated decision for them, depending upon their tolerance of risk and their resources to collect invoices.

Riviera Finance has 34 carriers with varying outstanding balances with Network F.O.B. and they will benefit from Riviera Finance’s non recourse factoring program. Now, our skilled staff will roll up their sleeves and by various means begin collecting on these unpaid freight bills.

Riviera Finance has been in business since 1969 and provides full service factoring on a non-recourse basis. We always have a vested interest in the credit decision and collection of an invoice.

Invoice Factoring as a Backup Source of Cash

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How to Use Invoice Factoring as a Backup Cash SourceConsider invoice factoring with Riviera Finance as a backup source of cash flow.

“Waiting to get paid” is the not-so-new normal in the world of business.  In the U.S., companies take an average of 38 days to pay their bills.  In some industries, the wait is much longer.

But to the business owner, the waiting isn’t the hardest part.  Guessing when the customer will actually pay is the real challenge.

Among the many reasons businesses don’t get paid on time, here are a few:

  • customer cash flow issues (yes, customers have them too)
  • customer cash flow management (float on your money)
  • seasonal workload issues
  • customer staff changes
  • invoicing errors
  • lost or misplaced invoices
  • insufficient or inaccurate backup documentation
  • vendor preferences
  • disputes

Most likely, none of the above show up in the business plan!  Uncertainty of getting paid is one of the most common variables in small business, and a major cause of critical cash flow shortages.  But the only real way to avoid the impact of payment delays is to have a backup source of cash available.

Many businesses use non-recourse invoice factoring as a backup cash flow source.  It’s easy to get set up, and extremely flexible to the needs of the business.  When cash flow is needed, customer invoices can be submitted for payment and funded within 24 hours.  No debt is created, and there are no minimum funding obligations.  As a backup source, the invoice factoring line puts control back into the hands of the business owner without taking any payment flexibility away from the customer.

Take the stress out of guessing.  Set up an invoice factoring account with Riviera Finance today.

Small Business Lending at Highest Level Since 2007

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The Thomson Reuters/PayNet Small Business Lending Index rose to 120.4 in October, its highest level since August 2007.  This is generally seen as a positive leading indicator for the U.S. economy, as small businesses step up their borrowing to handle growth in orders.  Supporting this trend, PayNet also reports that delinquencies as a percent of loans set a record low in October.

As small businesses continue to lead the economic recovery, Riviera Finance provides financing alternatives to handle short-term, seasonal or ongoing cash flow needs.  Find a local office near you

Image courtesy of dan/FreeDigitalPhotos.net

When Selling Receivables Makes Sense

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Invoice Dollar Bill --- Image by © Images.com/CorbisAn alien from an all-cash planet would gaze in wonder at the trade credit system that runs the Earthly economy.  Let’s review:

Jack Brown invests his life savings to open a surfboard manufacturing business, MI Board, Inc.  It does well, attracting the interest of the media, surfers and retailers.  A few small shops in California put his boards on consignment.  They turn some heads, win some competitions, and MI lands $300,000 in initial orders from Becker, RonJon’s and HSN.  Cool.

After celebrating, Jack reads the purchase orders from his new customers.

All three want product delivered in 30 days.  All three want Net 45 Day terms.  Jack ecstatically calls his suppliers.  Because MI Board has no credit history, the suppliers want cash.

So essentially Jack ends up loaning $300,000, unsecured, without interest, to his customers for 45 days.  Meanwhile, he has to scrape together the upfront money for his suppliers and, of course, meet payroll for his suddenly inflated staff.  Until the retailers pay him, which might be 60 days or more, he will have serious negative cash flow.

This phenomenon called “trade credit” is especially hard on small, growing companies.  Their customers demand credit.  Their suppliers demand cash.  The result is a serious cash flow gap that threatens the life of the young business.

A factoring line is an ideal tool to help bridge this gap.  Jack can accelerate his cash flow, meeting the demands of his suppliers and his staff.  By factoring, Jack will sell the receivables (the loans he’s made to his customers) to the factoring company at a discount, receiving much-needed cash flow at the time he delivers his surfboards.  The factoring company then waits the 45 days or however long it takes Jack’s customers to pay.

In some cases, Jack’s supplier will accept an “assurance letter” from the factor.  This says the factor will pass funds directly to the supplier as soon as the invoices are factored.  The supplier’s perceived risk is reduced, as there’s no question of where the funds will go after Jack receives them.  In many cases a factor’s assurance letter will convince a supplier to offer credit terms where he would otherwise require cash.

Each situation requires a careful analysis of the elements of trade credit to determine how to fill the cash flow gap.  A factoring line and the tools a factor can provide will give business owners the flexibility to respond effectively to growth opportunities as they arise.