The speed at which you receive your funds is incredibly important. Here at Steelhead Finance, we want to help mitigate any scenarios that may hinder the growth and longevity of your business.
Steelhead has recently seen an increase in alternative financing companies in the marketplace, often referred to as a Merchant Cash Advance (MCA) or a Business Cash Advance. These vendors offer access to quick cash. We want to share with you how utilizing that type of business practice could negatively impact the factoring relationship and your business overall.
What Happens to Factoring if I Take Funds From an MCA?
If you sign an MCA Loan Agreement while already engaged in a factoring agreement, this would cause a default of your factoring agreement. A default means factoring funding would immediately stop.
Merchant Cash Advance Loan Issues
If you take on an MCA loan, the MCA will generally debit the loan payment directly from your bank account on a daily or weekly basis. Should you inadvertently miss a payment or have insufficient funds in your bank account, the MCA may immediately debit ALL money from your account in an attempt to be paid back in full. This action would leave you unable to pay your drivers, fuel bills, truck payments, and more.
Another step MCA companies will often take if a payment is missed is to maliciously attempt to redirect payment on your factored invoices. In the event they do this, the factoring company may be forced to hire legal counsel to be paid what is rightfully theirs, adding another cost to the you on top of trying to work through the cash flow and legal situation caused by the default to the MCA.
These extreme tactics may be due to the lack of regulation for this type of lender.
Why Factoring is Still the Better Option
When you need to capitalize on quick funding from your invoices, the factoring benefits are clear:
- Factoring will typically involve less risk to you than an MCA loan – MCAs charge based on your “projected” sales, which could cause you to borrow more than you’re reasonably able to pay back, while factoring turns your existing invoices in to cash.
- Factoring utilizes terms that match the life of the assets being financed.
- Factoring offers useful back office services that MCA companies don’t.
- Fees or interest charged by an MCA may reach up to the amount of the original loan while factoring fees are only a small percentage of an invoice including valuable services above and beyond just cashflow.
If you have any additional questions regarding the repercussions of using a Merchant Cash Advance loan, please contact your Relationship Manager – 800.727.3377.
Hear our own Kaiti Deaver explain what it’s like talking to trucking factoring clients on a regular basis at Steelhead Factoring.
Driver seems to be tired of the regulations after police found him to be overweight. Lightens the load right there spilling grain on the side of the road. There’s now a farmer somewhere that won’t be too happy.
Epic Truck Driving Skills
I love some of these throwback videos of some great truck driving skills from around the world.
This is a serious heavy haul load! This load took six trucks to move it!
Do you feel ready? It’s time… the latest Roadcheck Blitz will have about 9,000 inspectors in North America posted up and inspecting commercial vehicles and drivers June 4-6.
- An average of 17 commercial vehicles per minute are inspected throughout North America during the 3-day period.
- A focus will be taken on motor carriers’ steering and suspension during this year’s Roadcheck.
- CVSA inspectors shelled out 537 steering-related violations last year – 286 commercial vehicles were placed out of service.
- Last year, there were 500 suspension violations and 538 suspension-related OOS citations issues.
- There were 67,603 total inspections that took place last year – 21.6% of all inspected motor vehicles and 3.9% of drivers were placed OOS in 2018.
- Last year’s focus was hours of service – 43.7% of all drivers were placed OOS because of HOS violations in 2018.
The number one reason trucks are placed out of service during an annual CVSA International Roackcheck Blitz have to do with Brake Problems. Tires and wheels are a close second behind brake issues followed by Load Securement that accounted for 13% of OOS violations in 2018.
Other operating requirements and vehicle mechanical conditions to keep in mind for the 37-step Standard Level I Inspection include: coupling devices, driveline/driveshaft, driver’s set, exhaust systems, frames, fuel systems, headlamps, lamps/flags on loads, stop lamps steering mechanisms, suspensions, tail lamps, turn signals, van & open-top trailer bodies, wheels rims and hubs, and windshield wipers.
Inspectors may opt to conduct the Level II Walk-Around Driver/Vehicle Inspection, Level III Driver/Credential/Administrative Inspection or Level V Vehicle-Only Inspection.
Make sure you’re in good order in advance and stay safe.