Though often overlooked, the trucking industry is vitally 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 problems. But for small to mid-size companies operating on a decent budget, it might halt an option. Expenses regarding payroll and gas come in the time between payment, and not paying your drivers is never a good business rehearsal. Add to that rising fuel costs, delays due to traffic congestion, driver shortages and new regulations, and is a recipe for financial hardship.
Therefore, trucking companies often have flip to outside borrowing. The following are some strategies to trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to might by which businesses sell their accounts receivables to a factoring company. Approval for factoring draws on on the creditworthiness of the trucking company’s customers.
At the time of the sale, the client gets 80-90% for this cash back immediately from the invoices. The remainder of the balance comes after customer repayment, less a percentage fee that typically ranges from 1-5%.
This choices best for B2B businesses that cannot afford to wait for payment, along with the cost is 4-5% monthly with an effective annual price typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are an cheapest way of financing. Mortgage process involves an application and analysis of the company’s creditworthiness and financial track record. Small companies especially are more likely to be thrown to the wolves for loans, although exceptions do be.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s life’s savings. This form of funding greatest for for trucking outfits having a great credit report . and have no need for the money immediately.
Cash-Advances
Cash advances take place when an organization receives an advance sum during a lender. The company pays financial institution back with percentages associated with their monthly card receipts up to the loan (plus a predetermined rate) is repaid. Happen to be legal limits to the rates, and so they also cannot be changed retroactively. The profit to cash advances is immediate cash- is certainly the fastest method for obtaining cash without going to a loan shark.
This financing method is the for trucking companies who require immediate cash for regarding amount of this time and have limited financing options. Cost of is usually 20% or older.
Lease-Back
A trucking company might want to sell property, plant, and/or equipment, and simultaneously leases it back for cash.
It ideal for trucking companies with valuable plant or equipment assets usually are underutilized, along with the cost is monthly lease payments additionally, the depreciation and tax burdens of machines.
Choices, Choices
Every trucking company is unique, make use of is almost them to discover funding solutions that meet their individual needs. Being informed on all the options is the first step toward finding a worthwhile cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444