FREIGHT FINANCE\\\ Cass Europe offers


invoice finance solution


Invoice financing is beginning to make inroads into the freight forwarding and international transport sphere, says Kees de Jongh, managing director of


freight audit and payment


specialist, Cass Europe. The service has been available in the US for some time, and is now being made available in Europe, including the UK. Essentially, a forwarder or


transporter who might normally expect to be paid in, say, 45 days or perhaps longer – 120 days is by no means unusual – can


take advantage of the service to accelerate the payment through Cass Europe, for a percentage fee of the total charges. With payment times lengthening, the appeal of this type of facility is growing, says Kees de Jongh. Similar services have always


been available from banks and other financial institutions for trade payables financing, but Kees de Jongh believes that freight audit and pay companies are uniquely advantaged to address freight forwarding and transport invoices. “The banks typically want a lot of


security and other information to secure early payments, but because we’re involved in the auditing and invoicing process for our shipping customers, we know the invoice almost certainly will be paid and it can be much simpler to do it though us. In addition the process is not as complicated as it is with banks.” The service is available through


a monthly contract – there are no long-term commitments. It will also operate across national boundaries in Europe and in different currencies.


Currency exchange


Banks may not be lending much these days, but they are still essential for a forwarder’s day to day operations, says Baxter Freight owner, Ian Baxter (right). Anyone doing even a modest amount of business abroad will probably need multi-currency accounts – dollars and Euros being the most popular choices. Any major business bank should be able to offer this facility, which essentially means setting up foreign currency accounts linked to the Sterling current account. The advantage is that anyone


who receives payment in, say, dollars but also has outgoings in the same currency can simply bank the dollars until they need to be paid out again. Without a dollar account, the only alternative would be to exchange them into Sterling so that they can be paid into the current account – but


Issue 2 2015 - Freight Business Journal


35 It’s big business – for the banks


Cecil Bryan, president of the Logistics Alliance Network, says that some of the larger buyers who outsource freight payment processing to a bank do not pay transaction fees for the service. This is because the bank makes a significant amount of revenue off their sellers when they charge them a percent of the invoice amount to be paid early. As an example, a very large buyer with


transportation expenditures of $500 million could easily generate over $20 million in revenue for the bank; a US bank bought the company Bryan worked for because of its customer portfolio. “The combined freight expenditures for all of them was over $5 billion dollars and the bank estimated they would make up to 1% - which is a lot of money.”


Time to look into peer to peer lending? Many businesses are looking at peer to


peer lending as an alternative to traditional bank finance. Could it be right for the freight industry, we asked Nick Moules, marketing and communications manager at the rebuildingsociety.com He told FBJ: “Our investors are looking for


well-run established businesses with turnover of £200,000 per annum or more that are looking to expand. They recognise that many good businesses just lack the access to cash. Our platform allows successful businesses to tell people what they need the cash for, how they’re going to grow and where lenders can help them succeed.” In order to succeed in a peer-to-peer (p2p)


lending environment, businesses need to be prepared to be open and up front about the positives and the challenges they face, he adds. Borrowers come from all sectors and locations


across the UK, but they tend to be like talking to individuals, rather than organisations. But how easy is it to get p2p finance if you are


because banks have different rates at which they buy and sell currency, exchanging money always erodes its value – and if the dollars later have to be found to pay a supplier demanding payment in that currency, it will be eroded a second time. Being able to bank money


without exchanging it also takes out the risk of being wrong- footed by a change in exchange rates. Admittedly, this can work


either way, but most people will probably sleep easier in their beds at night without having to worry about what the forex markets are up to. These days, multi-currency


accounts are quite inexpensive – bank charges can be as little as a few pounds per month – and most are available online – though many transactions can only be done at set hours of the day.


either in a sector that is perceived as financially unexciting - like road haulage - or something that isn’t readily understood by the wider public – such as freight forwarding? “In our experience,” says Moules, “lenders


are completely sector-agnostic and primarily interested in the individual approach of the business. Of course, some industries are more niche and require a bit more explanation, but the businesses that receive the best rates are those that engage the best, responding to investor enquiries in a timely manner and demonstrating sound business logic. We’ve funded businesses from less ‘exciting’ sectors like the logistics market – and web hosting and specialist b2b engineering– as well as very consumer-friendly markets like


retail and leisure.” While some peoples’ perception is that p2p


lending is aimed primarily at the ‘new economy’ like online businesses, that is far from being the case, Moules says. In fact, “it’s the traditionally run business that p2p lenders are attracted to. They want to see strong asset-backed companies, which are not typically new economy businesses. Of course there is space for all, but the more conservative lenders prefer it when a loan is backed by a company or personal asset. Manufacturing companies are usually able to provide these, for example.” Cost of p2p borrowing is difficult to quantify –


for some it will be cheaper, for others it won’t be compared with traditional forms of finance. It will almost certainly save money over credit cards or overdraſts although maybe not some of the best bank deals at around 5% or so. However, says Moules, “we find the majority will be better off with p2p. Where we can definitely say we have an advantage is in speed (application to drawdown is usually within one month) and convenience. It is all done online and there are no early repayment clauses, so business owners don’t need to worry about losing valuable time and the price they have at the end is the price they’ll have throughout – no nasty surprises.” The Rebuildingsociety only offers a


straightforward loan with monthly capital and interest repayments at the moment, so the products are similar to the banks. However, there are p2p lenders that allow one-off blue chip invoices to be traded, adds Moules. “This market was established to tackle the pain points that businesses encountered when dealing with banks – slow response times, hidden clauses and recalling of loans on a whim - which isn’t possible with us.”


US hauliers turn to invoice finance


More US-based transportation companies are turning to freight payables or invoice financing services because of lengthening terms of payment. Major manufacturers’ credit terms are lengthening to 60 days or even beyond, says Allan Miner, president of US-based freight payment company, CT Logistics. Many, he says, would rather pay a small percentage of the value of the invoice and get paid within, say, ten days, rather than wait the full term. A small carrier operating on slim margins that has bills to pay will have little choice but to use some sort of expedited payment system, he believes. What has been happening in the industry, says Miner, is that “US


shippers are negotiating with fewer and fewer transport providers, to whom they are giving more volumes but transport providers have had to reduce charges. At the same time, they are having to


wait longer because they are dealing with larger manufacturers. They’ve got all their eggs in one basket.” Strangely, the US was once one of the most regulated


transportation markets; government agencies controlled road transport quite closely, including payment terms. Not so long ago, shippers were legally bound to pay their transport contractors within seven days. Then it was raised to 15, to 21 and eventually 30 days before the regulations were abandoned and everything became governed by contracts. Not all freight invoices in the US are paid on expedited terms – it’s


still a minority, says Miner – but the proportion is increasing. There alternatives for expedited finance to the freight payment


companies including banks and factoring companies, but Miner reckons that CT Logistics has an advantage. Because CTL has good


knowledge of the transportation market – it is also one of the US’s leading freight audit and pay firms - it will have already done its homework on the companies involved and signing up will be a much less protracted process – just a credit and background check. “We often will have an ongoing relationship with the transport provider and shipper; we’re dealing with a smaller universe. We just charge a small handling fee and I’d say we are less expensive than a finance house,” he told FBJ. A very big logistics company probably could go to a finance


house and get a good deal, but not the smaller transportation firms that are CTL’s main customer base. In any case, the big shipping lines and global forwarders are in a position to look after themselves – very often it will be they who impose strict payment terms on the shipper, not the other way round.


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