Why does a freight brokerage’s gap between paying carriers and being paid worry lenders?

The core issue is timing. The brokerage promises carriers quick payment, but shippers pay on their own schedule. Between those two dates, someone is lending. That someone is the brokerage, using its own cash or a credit line. When the gap widens, because a shipper pays slowly or a big customer fails, the brokerage can run short even if the business is profitable on paper. A lender wants to know that this risk is understood.

Lenders therefore study receivables closely. They look at how old the unpaid invoices are, whether a few shippers owe most of the money and how often disputes or deductions occur. They also check whether the borrower has a buffer, such as steady cash, credit access or a record of collecting on time. Fuel surcharges and accessorial charges can complicate invoices.

If you are the owner, prepare a clear picture. Show the average time to collect, the average time to pay carriers and how you handle a delayed payment. Document your shippers’ payment histories and credit checks. Tell the lender how you would protect carrier payments in a bad month. Ask your accountant to explain how the facility’s terms and the working capital need might look to a lender. Keep records tidy so a lender can follow them.

Key takeaways

• Show how long you take to collect and how long you take to pay carriers.
• Break down receivables by customer and by age.
• Explain your cash cushion and what you do in a bad month.