Though often overlooked, the trucking industry is really important to the health for the US economy. Think about it: without truck drivers delivering goods, interstate commerce would grind to a screeching, tire-burning halt.
Unique Challenges
Despite the importance of trucking companies, the way the system is structured often leaves them within a shaky financial position. Truck companies submit invoices for services rendered, and then often wait 30-90 days for payment on the accounts receivables.
For a bigger company with large cash reserves, waiting to be paid would not be a huge concern. But for small to mid-size companies operating on a strict budget, it might stop an option. Expenses since payroll and gas provide in the time between payment, and not paying your drivers is never a good business repeat. Add to that rising fuel costs, delays due to traffic congestion, driver shortages and new regulations, and this is a recipe for financial hardship.
Therefore, trucking companies often have to show to outside financing. The following are some strategies to trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to the process by which businesses sell their accounts receivables to a factoring company. Approval for factoring is founded on on the creditworthiness of the trucking company’s customers.
At the time of the sale, the client gets 80-90% belonging to the cash back immediately from the receipts. The remainder of the balance comes after customer repayment, less a portion fee that typically ranges from 1-5%.
This choices best for B2B firms that cannot manage to wait for payment, and the cost usually 4-5% monthly with a healthy annual interest rate typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are an cheapest way of financing. Mortgage loan process involves an application and review of the company’s creditworthiness and financial history. Small companies especially can be rejected for loans, although exceptions do be.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s bank account. This form of funding is the for trucking outfits using a great credit ratings and don’t need the money immediately.
Cash-Advances
Cash advances take place when business receives a loan sum from our lender. Business pays loan provider back with percentages of that monthly card receipts just before loan (plus a predetermined rate) is repaid. Happen to be legal limits to the rates, and also cannot be changed retroactively. The benefit to cash advances is immediate cash- can be the fastest method for obtaining cash without in order to be a loan shark.
This financing method ideal for trucking companies who require immediate cash for a much smaller amount of this time and have limited financing options. The cost is usually 20% or more.
Lease-Back
A trucking company may wish to sell property, plant, and/or equipment, and simultaneously leases it back for cash money.
It ideal for trucking companies with valuable plant or equipment assets which usually underutilized, and the cost is monthly lease payments as well as the depreciation and tax burdens of resources.
Choices, Choices
Every trucking company is unique, make use of is up to them to locate funding solutions that meet their individual needs. Being informed on all possibilities is begin step toward finding a fitting cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444