Trucking lender and factoring company Instapay, alongside its parent company Flexible Funding, filed for Chapter 11 bankruptcy protection, according to court records filed with the U.S. Bankruptcy Court of North Texas in Fort Worth.
San Francisco-headquartered Flexible provides asset-based lending within the staffing industry, while Instapay focuses on the transportation industry. Flexible’s lending product enables clients to fund and grow their businesses using the accounts receivable that they receive from their customers, Flexible’s attorneys said in a filing last Monday.
Instapay is a factoring company to help suppliers improve cash flow. It acquires and becomes the owner of the accounts receivable from its clients. Funds from these purchased accounts provide liquidity to Instapay’s clients, which use Instapay to cover operations costs and get trucks back home after deliveries.
According to a February 2020 FreightWaves article, many truckload (TL) carriers depend on factoring to bridge cash flow gaps when working with shippers that have longer payment cycles. Those that lack sufficient working capital and don’t qualify for credit lines turn to factoring as a means of funding their expenses.
The industry providing this type of service is entering a period of consolidation, according to a June 2021 FreightWaves Small Fleet Summit fireside chat.
Flexible and Instapay have between 600 and 700 clients combined, with approximately 400 as currently active. Their portfolio consists of about $110 million in loans and factored receivables, according to the filing.
In a joint petition on Monday, Flexible and Instapay asked the courts to authorize them with the ability to use cash collateral to fund borrower accounts, pay present operating expenses, including payroll, and to pay vendors to ensure continued operations. Granting this request will ensure that Flexible and Instapay have the resources to commence Chapter 11 protection.
“The Debtors request immediate authority to use the Cash Collateral to fund the Debtors’ day-to-day operations. Absent such relief, the Debtors will not be able to continue to operate their businesses. In sum, failure to obtain authorization for the use of the Cash Collateral will be disastrous to the Debtors and their creditors,” attorneys representing Flexible said.
On Tuesday, Judge Edward L. Morris granted that request, allowing a cash collateral of as much as $15 million.
“Good cause has been shown for the entry of this Order. The Court finds that the notice of the Motion and the Hearing on the Motion to the U.S. Trustee and Lenders was sufficient under the circumstances. Entry of this Order is justified and appropriate under the circumstances. Entry of this Order is in the best interest of the Debtors’ estates,” said Tuesday’s court order.