We have seen shippers extend their payment terms recently, and since the financial crisis of 2008, it is the largest we have seen. As a freight broker, you need to have a plan to secure the working capital you need in this ever changing business.

http://saim.edu.np/define-empirical-dissertation/ How do you do it?

http://globalsecurityops.com/how-to-write-master-thesis-in-latex/ The golden rule of business financing is to match the term of the obligation to the asset being financed. For example, you don’t finance a car for 30 years and mortgage a house for 36 months. It goes the other way around, as your house is a bigger asset than your car, and therefore, requires a longer payment term. Carriers typically deal with these stuff more than brokers do, and us brokers experience it mostly when matching account receivables and operating expenses. Though it looks simple and it is easy to see what you are doing, you are still prone to overlooking some things.

Therefore, the golden rule of working capital financing for freight brokers is to adapt dynamically to your volume, both up and down.

A/R financing options for Freight brokers

  1. Online (cash flows) loans – Though structures vary between lenders, most of them generally involve short term loan facilities, usually between 90 to 180 days. They also have frequent ACH withdrawals from your business bank account.
  2. research bib Factoring – There are lesser factoring options for brokers than there are for carriers due to the issue of carrier payables. Most companies insist upon paying carrier’s on their broker’s behalf while some are content with monitoring the outstanding payables.
  3. Asset based lending – Commercial financing can also be done through collateral (accounts receivables) rather than traditional bank loans. This results in a slightly higher pricing and servicing protocol which may be a worthwhile trade-off for businesses seeking flexibility and availability.
  4. Bank loans – banks nowadays have become more aggressive than commercial lenders in regards to structure and terms they offer to brokers. However, banks may have a different risk tolerance and tend to leave whenever the economy gets choppy.

Most brokers are focused on their account receivables and stress less concern on their account payables. As most brokers would say, “That is where the money is.” Though we agree on that fact, a broker must also consider the complexity of projecting working capital needs included in carrier payables. This way, you can save yourself the trouble caused by establishing accounts payable through a cash needs vs. business strategy policy.