I launched my first logistics company with $4,000 in working capital and never raised another dollar. Not because I was disciplined—because I didn’t need to be. The clients were Fortune 100 companies, and Fortune 100 companies pay. Thirty days, forty-five at the outside, every time.
The second company, in the nineties, was billing five hundred thousand a month by 1998 and spent most of its life short of cash. Same industry. Same founder. Different customers, and customers are the financing structure whether you think of them that way or not.
Work out what you can afford before you go looking
Most owners approach receivables financing by asking what it costs. That is the second question. The first is what the business can carry, and it takes about twenty minutes to answer.
Take a job. Subtract every direct cost of delivering it. That is your gross margin per job. Add the month’s worth together, subtract overhead, and you have the operating profit. Whatever sits inside that number is what is genuinely available to pay for money. Everything outside it is you buying growth with your own equity and calling it a financing decision.
The offers are not comparable
When I went looking, the three arrangements in front of me were a fifty percent advance at three and a half points, an eighty-five percent advance at two and a half, and an industry-specific transportation facility at eighty-five percent and a point and a half. Those are not variations on one product. The advance rate determines whether the financing actually solves the cash problem; the fee determines whether solving it leaves you anything.
A business with thirty-point margins can absorb three and a half points without noticing much. A high-volume, low-margin operation — which is what most logistics is — cannot, and the fee will quietly consume the growth it was meant to fund.
The line I still repeat
One of the people I spoke to during that search said something I have used ever since: never buy short and sell long.
He meant the mismatch. If you pay for money by the week and collect from customers by the quarter, the gap isn’t a cash flow inconvenience. It is the business model, and no amount of sales volume fixes it. It gets worse with volume.
So before the term sheets: find out how your customers actually pay. That single fact will tell you more about how much financing you need than any projection you build.