Startup Democratizes Freight Broker Financing

Axle Payments secures $27.7 million in debt and equity financing to help brokers manage cash flow

Cash flow problems are a perennial challenge in the trucking industry. The reasons are varied, but topping the list is that shippers often wait for one to two months after a load has been delivered before issuing payment, wreaking havoc on carriers and intermediaries that can't afford to wait.

Various financing strategies are available to help supply chain companies address this working capital conundrum. One is called factoring, a practice in which a third party — the "factor" — for a fee purchases unpaid invoices from businesses needing cash. 

A common tactic for carriers and brokers, factoring is now getting a next-generation makeover, with new entrants aiming to bring a more streamlined, tech-enabled approach to the business. 

Digitization Drives Innovation

A case in point is Axle Payments, a New York-headquartered platform that manages financing for freight intermediaries. Axle, which got off the ground last year, gives small and medium-size brokers a cash infusion by purchasing their accounts receivables. Riding a wave of digitization, it also provides back-office automation, assisting customers with invoicing, collections, and carrier payments.

In addition, the company offers a "quick pay" service that sends payment to the carrier at the same time that it advances funds to the broker. 

Although the financial jargon gets a bit confusing, "quick pay" differs from factoring in that it refers to a broker advancing the trucking company cash for an invoice. The problem is many smaller brokerages don't have the revenues to support a loan program. Combining quick pay and factoring kills two birds with one stone, so to speak.

Assisting Smaller Players

Several factors distinguish Axle from competitors, said Bharath Krishnamoorthy, co-founder and CEO. The company focuses exclusively on freight intermediaries, and doesn't lock customers into long-term contracts or charge extra for quick pay.

Despite or perhaps because of the pandemic, Axle is averaging 40% month-over-month growth in 2020, and this week secured $27.7 million in debt and equity financing. Participating in the round was Anthemis, a global venture platform, and Techstars. Earlier this year Axle raised a $1.4 million pre-seed round, led by Trucks Venture Capital.

Enabled by technology, Axle will make factoring available to all carriers via freight intermediaries, regardless of their size, Ruth Foxe Blader, partner at Anthemis, told FreightWaves in an email.

"Just like robo advisors have done for wealth management, Axle is democratizing invoice financing for all carriers by efficiently delivering valuable back-office technology and payment solutions to freight intermediaries," Blader said.

A lawyer by training, Krishnamoorthy co-founded Axle with a high school friend, Shawn Vo, who brings to the company a background in financial technology. The two worked on several transportation companies together and soon realized the most salient problems facing logistics businesses related to cash flow. 

Coronavirus volatility is putting a strain on brokers, Krishnamoorthy said, but the financial challenges are likely to get worse during the economic recovery as more carriers demand payment. Axle will use the debt portion of the recent financing to scale operations to additional markets, he said.

Digital brokerages such as Convoy and Uber Freight are forcing traditional brokers to gravitate toward tech solutions that aim to streamline financing to carriers, added Krishnamoorthy.

"That's where we come in. Not every freight broker is in the business of technology, and they shouldn't be."

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Photo by Marcin Jozwiak on Unsplash