How a Freight Forwarder Used Invoice Finance to Offer Longer Terms and Win New Clients

Summary
A New Zealand freight forwarding company wanted to attract more clients by offering longer payment terms. But the business model created a timing gap: freight, customs duties, and GST had to be paid upfront, long before customers settled invoices. With no tangible assets to secure against, the bank was unable to extend funding lines. Referred by their business advisor, the firm turned to Lock Finance. A tailored invoice finance facility allowed them to fund upfront costs, extend 60-day terms to new clients, and grow profitably without pledging personal property.

The Challenge: Meeting Client Demands Without Undermining Cashflow

In freight forwarding, liquidity is as important as logistics. Costs must be paid to carriers, ports, and customs immediately, while billing clients often happens weeks later.

The company realised a pattern in conversations with potential customers: many wanted more generous payment terms than their current providers could offer. Extending terms, however, risked putting pressure on working capital. Without a funding solution, the very strategy designed to attract new clients could destabilise the business.

The Bank’s Position: A Question of Security

Like many firms in the freight and customs sector, this business had limited tangible assets. The bank, while supportive of the company’s performance, was constrained by its own policies. Without property security, specifically the director’s home, it would not extend facilities further.

This was not a reflection of the business’s viability but of the structural mismatch between traditional bank lending and the asset-light, cashflow-heavy nature of freight forwarding.

The Turning Point: Advice that Changed Direction

The owners consulted their business advisor, who recognised the funding gap for what it was: a cashflow timing issue, not a business model flaw. Having previously worked with Lock Finance, the advisor suggested exploring invoice finance as a solution.

The Solution: Invoice Finance to Fund Growth

After discussions with Craig Brown at Lock Finance, a facility was structured around the company’s receivables. This allowed the freight forwarder to extend terms of up to 60 days to clients while maintaining stable cashflow.

Key features included:

• Funding linked to invoices as soon as they were raised, not weeks later
• No requirement for property security or restrictive covenants
• Pricing is competitive with a bank overdraft, only marginally higher, with significantly larger  flexibility
• A facility that scaled automatically as sales grew
  
  

The Outcome: Profitable Growth, Stronger Client Base

The facility enabled the business to execute its new strategy with confidence:

• New clients were won on the strength of extended terms
• The additional profit generated on higher sales comfortably outweighed the cost of finance
• Cashflow stability was maintained, ensuring obligations such as GST, freight, and payroll were met without strain
• Directors preserved control, without needing to tie in personal assets
  
  

“We wanted to offer clients the flexibility they were asking for, but we couldn’t do it alone. Lock Finance gave us the confidence to grow without compromising cashflow or security.”
— Managing Director

Lessons for Freight Forwarders

Freight forwarding is capital intensive but asset light. Banks, tied to tangible collateral, are rarely able to provide facilities aligned with this reality. Invoice finance for freight forwarders bridges the gap, providing working capital that grows with receivables and supports commercial strategies like extending payment terms.

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