How a Factoring Line of Credit Trumps Factoring and a Line of Credit

eCapital Corp

Last Modified : Jan 16, 2024

Fact-checked by: Bruce Sayer

Regardless of whether it’s riding through a pandemic, battling against freight shortages or going flat out to keep up with demand, maintaining positive cash flow is a constant challenge for truck company owners. Factoring Line of Credit was designed exclusively to help trucking companies gain control of their cash flow with cost effective and reliable access to working capital.

Your customer wants to pay in 60 days, but over-the-road expenses are upfront and your employees have to be paid regularly. It’s no wonder that most trucking businesses, at some time or another, wrestle with managing their cash flow. To even out the cash flow rollercoaster most business owners’ first step is to approach a bank for a traditional business line of credit. But banks are risk averse and typically reject loan applications from trucking companies.

What can a trucking business do when they can’t get a traditional line of credit approved or extended?

Although it may be a business owner’s first choice, a traditional business line of credit with the bank is not necessarily the best option:

• Trucking companies are generally rejected when applying for a bank loan
• A bank loan will include restrictive covenants that limits growth potential
• A bank can limit funding or withdraw the loan if financial benchmarks are not met
• A bank offers no additional value added services

Fortunately, a bank business line of credit is not the only option available. Trucking companies have discovered the immense leveraging power of their unpaid invoices to access working capital. Using the combined credit strength of their customer base, trucking companies can easily qualify for a Factoring Line of Credit to gain fast, reliable funding.

Invoice Factoring vs. Line of Credit: Why choose? Factoring Line of Credit offers the best of both worlds

A Factoring Line of Credit is an alternative financing option that’s unique to eCapital. Acting much the same as a business line of credit, it provides access to funds as needed with fees paid only on funds drawn plus a small administration charge. While it appears similar to a banking line of credit, it delivers far greater flexibility to optimize access to funds. Factoring Line of Credit is a form of invoice factoring and is therefore not a loan, it is the selling of invoice account receivables to build a cash reserve from which you are able to draw from.

How Factoring Line of Credit works:

• You deliver a load, invoice the customer and submit invoice to eCapital.
• Upon confirmation, we transfer the majority of the invoice face value into your account.
• Draw the funds you need as you need it.

How is Factoring Line of Credit different from a bank loan?

• Your access to funds grows with your business.
• There are no regular payments, fees are paid on funds drawn.
• The service includes professional management of accounts receivable and collections. That translates to reduced headaches and administrative costs.

Why use Factoring Line of Credit?

Businesses that manage to secure a traditional business line of credit are often handicapped by the restrictive bank covenants that govern the loan agreement. Bridging a difficult transition or stretching the business to meet growth opportunities is not an option under these conditions. In this arrangement, the bank has more control over the company than the business owner.

Factoring Line of Credit is designed exclusively for trucking companies providing a highly flexible form of financing without restrictive covenants. It provides a cost-effective funding option for trucking companies that:

• Are unable to get a traditional bank loan.
• Have violated their bank loan covenants.
• Are experiencing a difficult transition.
• Manage seasonal variations in volume.
• Want to expand to meet growth opportunities.

Banks screen companies very carefully before agreeing to lend them money.  Their sole interest is to protect the interest of the bank. It is common for banks to reject loans solely based on the industry the business belongs to; trucking is one such industry. Freight factoring companies such as eCapital have a completely different approach. Our focus is to empower trucking companies by accelerating their access to cash flow. With this as our primary purpose, we then provide additional support with professional accounts receivable management, credit search tools and cost-saving services to protect your bottom line.

eCapital Corp

eCapital Corp. is committed to supporting small and middle-market companies in the United States, Canada, and the UK by accelerating their access to capital through financial solutions like invoice factoring, factoring lines of credit, asset-based lending and equipment refinancing. Headquartered in Miami, Florida, eCapital is an innovative leader in providing flexible, customized cash flow to businesses. For more information about eCapital, visit eCapital.com.