Truck lenders and factoring companies Instapay, alongside its parent company Flexible financing, filed for Chapter 11 bankruptcy protection according to records filed with the North Texas Bankruptcy Court of Fort Worth.
Headquartered in San Francisco, Flexible offers asset-based lending to the human resources industry, while Instapay focuses on the transportation industry. Flexible’s loan product enables clients to fund and grow their business with the claims they receive from their clients, Flexible attorneys said in a filing last Monday.
Instapay is a factoring company that helps suppliers improve cash flow. It acquires and becomes the owner of the accounts receivable from its customers. Funds from these purchased accounts provide liquidity to Instapay customers who use Instapay to cover operating expenses and bring trucks home after deliveries.
According to a February 2020 FreightWaves article, many truckload (TL) carriers rely on factoring to fill cash flow gaps when working with shippers who have longer payment cycles. Those who do not have enough working capital and are not eligible for lines of credit use factoring to fund their expenses.
The industry providing this type of service is entering a period of consolidation, according to a fireside chat from the FreightWaves Small Fleet Summit in June 2021.
Flexible and Instapay together have between 600 and 700 customers, of which around 400 are currently active. Her portfolio consists of approximately $ 110 million in loans and factoring claims, according to the filing.
In a joint petition on Monday, Flexible and Instapay called on the courts to allow them the option to use cash collateral to fund borrower accounts, pay ongoing operating expenses, including payroll, and pay sellers to keep operations going. Granting this request will ensure that Flexible and Instapay have the resources to begin Chapter 11 protection.
“The debtors apply for immediate power of attorney to use the cash collateral to finance the debtors’ day-to-day business. Without such relief, the debtors cannot go on with their business. In summary, the failure to obtain approval to use the cash collateral will be catastrophic for debtors and their creditors, ”Flexible lawyers said.
On Tuesday, Judge Edward L. Morris granted that motion and granted up to $ 15 million in cash security.
“There is an important reason for the registration of this order. The court found that the notification of the motion and the hearing on the motion to the U.S. trustee and lenders were sufficient in the circumstances. The entry of this order is justified and appropriate under the given circumstances. The entry of this decision is in the best interests of the debtors’ estate, ”said the court decision on Tuesday.