Invoice Factoring

This service allows companies to sell their accounts receivable (unpaid invoices) to a finance provider, who then advances a percentage of the invoice value upfront. It helps businesses improve their cash flow by accessing immediate funds instead of waiting for customers to pay.

Let's consider an example

of how a invoice factoring could benefit a transport and logistics business:

Imagine a freight forwarding company that has provided transportation services to several clients. However, due to the standard payment terms agreed upon, the company is facing a cash flow gap while waiting for the invoices to be paid. They need immediate funds to cover operational expenses and ensure smooth business operations.

The freight forwarding company decides to leverage invoice financing from Cargo Financing. They have outstanding invoices totaling $100,000 from their clients, which are due to be paid within 30 days. Instead of waiting for the payment term to elapse, they approach Cargo Financing for invoice financing.

Cargo Financing evaluates the creditworthiness of the freight forwarding company's clients, the validity of the outstanding invoices, and the overall financial health of the business. Based on their assessment, Cargo Financing assist the client in getting an approval with one of the lenders available to them.

After establishing the terms of the invoice financing arrangement. Let's assume your approved to to advance 80% of the invoice value upfront and charges a fee of 3% for the financing service. In this case, the freight forwarding company would receive an immediate advance of $80,000 (80% of $100,000).

Once the invoices are paid by the clients within the agreed-upon payment terms, the freight forwarding company receives the remaining 20% of the invoice value, minus the financing fee. In this example, they would receive the remaining $20,000 (20% of $100,000), minus the 3% financing fee.

By utilizing invoice financing, the freight forwarding company can access immediate funds based on their outstanding invoices. This allows them to bridge the cash flow gap, meet operational expenses, pay suppliers, and continue their business activities without interruption while awaiting customer payments.

It's important to note that the terms, advance rates, and fees for invoice financing can vary depending on factors such as the creditworthiness of the customers, the quality of the invoices, and the specific lending policies of Cargo Financing or any other financial institution.