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Trucking Sector Factoring Firm Instapay Files for Bankruptcy

Instapay Flexible LLC and its parent company Flexible Funding Ltd. Liability Co. are now under bankruptcy court protection.

Both firms are considered alternative lenders. Instapay is a factoring firm that works with trucking clients. It provides clients with funding in exchange for their accounts receivable. Parent firm Flexible Funding is focused on asset-based lending. It makes revolving loans to clients in the staffing sector based on the value of their accounts receivable (AR), after accounting for a reserve amount.

The two filed for Chapter 11 protection earlier this month in a bankruptcy court in Fort Worth, Tex. Instapay’s petition listed assets and liabilities each at between $10 million to $50 million. The Flexible Funding petition estimated assets and liabilities each at between $100 million to $500 million. The parent firm owes about $96 million in secured debt.

Once the Chapter 11 petition was filed, unsecured creditors were placed on hold in connection with the receipt of payments owed to them prior to the Chapter 11 filing. The good news is that the debtors in their petitions indicated that they expect to have funds available for distribution to unsecured creditors. Whether they get pennies on the dollar or far more has yet to be determined.

Instapay filed a separate credit list that includes service providers such Amazon Web Services and carrier monitoring service Carrier411 Services Inc. The list also includes a range of carrier firm clients.

The companies got the nod from the bankruptcy court to jointly administer the Instapay Flexible LLC and the Flexible Funding cases.

Like other sectors, the trucking industry has been hard hit by the pandemic. There’s been concern that long-haul truck drivers could have a higher exposure to the virus due to stops along the way, including store workers, dock workers and those working at truck stops. The Centers for Disease Control and Prevention in December updated Covid guidelines for commercial truck drivers. Over the course of last year, there was fluctuating demand for drivers, either because certain industries scaled back or shut down. Many drivers were furloughed and some trucking firms went out of business.

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Despite the furloughs, the trucking industry seems to now be having the same problem as other sectors in finding workers. While some former truckers may have elected to retire early, others may have shifted to other sectors while on furlough. Currently, there appears to be a shortage of truckers, which has impacted the supply chain and getting goods to retailers.

In a court document filed with the bankruptcy court, the two businesses have between 600 to 700 combined clients, with about 400 active borrower accounts. The total combined portfolio is about $110 million in loans and factored receivables. They’ve asked for court permission to access their cash collateral—cash and cash equivalents that are held for the benefit of creditors—to fund borrower accounts. The request was granted on Wednesday on an interim basis.

“The debtors’ trucking clients depend on daily funding to cover transportation costs to continue operations and to get their truckers back home after deliveries,” according to a document filed by Instapay before the joint administration request was approved.

The Instapay document also said that it charges an up-front fee to factor a receivable, usually 3 percent, and then advances the rest of the funds. Basically, the lender receives AR requests from clients on a daily basis. It also receives on a daily basis, payments on those receivables that it has purchased. “Funds received from purchased accounts receivable are applied to clients’ outstanding availability to provide them daily liquidity,” the factoring firm explained as the reason for why it was requesting cash collateral access.