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Update: The Australian and New Zealand operations of Bibby Financial Services were acquired by Scottish Pacific Business Finance in late 2015 to create Australia’s largest non-bank invoice finance specialist. Welcome to our website.

Scottish A Freight Forward SolutionEverything about the transport sector is big. Big trucks, big distances, big fuel bills – and big risks. In a nation that relies heavily on road transport companies to move goods across vast distances or within congested cities within tight deadlines, transport operators can face particularly significant challenges to keep their vehicles on the road. Fluctuating fuel prices, driver shortages, tight deadlines, vehicle accidents and insurance claims, large and frequent payrolls, unpredictable vehicle maintenance costs, sales seasonality, and working capital shortfalls are ever-present challenges. While many operators may have a lot of specific industry experience, they can come unstuck because of insufficient working capital to support their business.

For transports large and small, cash flow is king
One of the key concerns for most transport entities – from small one-man bands to larger interstate road freight companies and refrigerated transport operators – is that they often have to wait 30 to 60 days (and perhaps even longer) to receive payments from clients.
In the meantime, they have to take care of bank loan or leasing repayments for vehicles, along with monthly bills for drivers’ wages, fuel, insurance and road taxes. Then there is the constant threat of costly accidents or vehicle breakdowns.

The combination of these forces puts extreme pressure on cash-flow and can have a negative impact on growth prospects for the business. What often happens is that owners are forever in catch-up mode as they get behind with supplier payments. They then prioritise driver wages and fuel payments simply to keep their trucks operating, while insurance payments and maintenance regimes may suffer. It becomes a slippery slope. Strong cash flow management is of course critical but improvements to debtor days may provide diminishing returns and ultimately no tangible improvement. In such circumstances, working capital financing options can come into play.

Invoice financing – a viable solution for the transport sector
Invoice financing is one solution that has been gaining increasing traction in the transport sector in recent years. Such a facility allows a business to access up to 80 per cent of the value of an invoice within 24 to 48 hours after a load has been delivered and verified. The remaining 20 per cent, less the financier’s fee, is available once the client pays in full.

One of invoice financing’s key advantages is that, unlike traditional bank loans, it provides a line of credit to businesses that is secured against their outstanding accounts receivables rather than tying up property as security. It is also scalable according to the size of the business (from owner-drivers and SMEs to enterprises with multi-million-dollar turnover), so facility limits can grow in line with business revenues. That means there is no need for regular re-negotiation of transport finance agreements during periods of growth or expansion.

Fuel for thought
In addition to easing cash-flow concerns, aligning with an invoice financing specialist such as Scottish Pacific can lead to significant improvements in a business’s broader cash-management systems as owners and managers benefit from the industry knowledge of experienced financiers.

One of the key benefits of an invoice finance facility is that it can provide small transport operators with the big business buying power. For a business with $500,000 outstanding in debtors, up to $400,000 can be raised quickly to help such businesses take advantage of lower fuel prices and/or bulk discounts to improve margins.

Smaller companies, in particular, also get to learn about best-practice strategies in their industry through ongoing relationships with their financiers. For example, managing fluctuating fuel prices and upfront fuel purchases can be testing. Measures to alleviate this problem can include - locking in fuel prices through long-term contracts and filling up at a customer’s fuel depot and then adding that set fee to an invoice. Likewise, financiers can assist with advice to protect profit margins and pay off vehicles faster.

In combination with the peace of mind of the benefits of invoice financing, this leaves transporters able to get back on the road, focus on their day-to-day tasks and grow their fleets and their business.

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