Though often overlooked, the trucking industry is critical 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 tight budget, it might stop an option. Expenses with regard to example payroll and gas come 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 backing. The following are some choices trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to difficult . by which businesses sell their accounts receivables to a factoring company. Approval for factoring centered on the creditworthiness of the trucking company’s customers.
At the duration of the sale, customer gets 80-90% of the cash back immediately from the statements. The remainder of the balance comes after customer repayment, less a percentage fee that typically ranges from 1-5%.
This choice is best for B2B companies that cannot manage to wait for payment, and also the cost is often 4-5% monthly with a healthy annual pace typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are usually the cheapest type of financing. The loan process involves an application and review of the company’s creditworthiness and financial track record. Small companies especially possess a be thrown to the wolves for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s life’s savings. This form of funding is better for trucking outfits having a great credit history and don’t need the money immediately.
Cash-Advances
Cash advances take place when business receives funding sum from your local neighborhood lender. The corporate pays financial institution back with percentages of that monthly card receipts before the loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, and they will cannot be changed retroactively. The benefits of cash advances is immediate cash- occasion the fastest method for obtaining cash without likely to a loan shark.
This financing method very best for trucking companies who need immediate cash for a much smaller amount of this time and have limited financing options. Cost of is usually 20% if not more.
Lease-Back
A trucking company could sell property, plant, and/or equipment, and simultaneously leases it back for moola.
It is best for trucking companies with valuable plant or equipment assets which usually underutilized, along with the cost is monthly lease payments additionally, the depreciation and tax burdens of machines.
Choices, Choices
Every trucking company is unique, that’s why it is up to them to discover funding solutions that meet their individual needs. Being informed on all your options is one step toward finding a suitable cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444