Though often overlooked, the trucking industry is really important to the health within 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 from 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 decent budget, it might not be an option. Expenses regarding payroll and gas come in the time between payment, and not paying your drivers is never a good business put into practice. Add to that rising fuel costs, delays due to traffic congestion, driver shortages and new regulations, and it is a recipe for financial hardship.
Therefore, trucking companies often have flip to outside financing. The following are some strategies to trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to carpet 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 period of the sale, customer gets 80-90% of 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 are best for B2B firms that cannot manage to wait for payment, along with the cost is often 4-5% monthly with an effective annual rate typically between 18-30%.
Bank Loans
Though in order to come by, bank loans are usually the cheapest involving financing. The loan process involves an application and analysis of the company’s creditworthiness and financial track record. Small companies especially can be rejected for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s bank account. This form of funding is better for trucking outfits using a great credit report . and don’t need the money immediately.
Cash-Advances
Cash advances take place when a small business receives an advance sum from a lender. Business pays the lending company back with percentages associated with their monthly card receipts just before loan (plus a predetermined rate) is repaid. There are legal limits to the rates, and they cannot be changed retroactively. The help cash advances is immediate cash- it is the fastest method for obtaining cash without in order to be a loan shark.
This financing method is the for trucking companies who require immediate cash for a short amount associated with your and have limited financing options. The cost is usually 20% or even more.
Lease-Back
A trucking company may wish to sell property, plant, and/or equipment, and simultaneously leases it back for moola.
It ideal for trucking companies with valuable plant or equipment assets which might be underutilized, and also the cost is monthly lease payments additionally, the depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, and it is almost them to find funding solutions that meet their individual needs. Being informed on all options is the first step toward finding a sufficient cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444