Though often overlooked, the trucking industry is essential to the health belonging to 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 in 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 problem. But for small to mid-size companies operating on a decent budget, it might not be an option. Expenses since 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 to turn 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 based on the creditworthiness of the trucking company’s customers.
At the duration of the sale, the client gets 80-90% for this cash back immediately from the debts. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This choices are best for B2B companies that cannot afford to wait for payment, as well as the cost is frequently 4-5% monthly with annual interest rate typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are these cheapest involving financing. The loan process involves an application and analysis of the company’s creditworthiness and financial history. Small companies especially possess a be turned down for loans, although exceptions do live.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s banking. This form of funding is the for trucking outfits having a great credit record and don’t need the money immediately.
Cash-Advances
Cash advances take place when a small business receives a loan sum during a lender. Business pays the lender back with percentages of their monthly card receipts before the loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, and so they also cannot be changed retroactively. The advantage of cash advances is immediate cash- is certainly the fastest method for obtaining cash without in order to a loan shark.
This financing method ideal for trucking companies who need immediate cash for the short amount associated with your and have limited financing options. Costly is usually 20% or older.
Lease-Back
A trucking company may choose to sell property, plant, and/or equipment, and simultaneously leases it back for cash.
It ideal for for trucking companies with valuable plant or equipment assets which usually underutilized, and the cost is monthly lease payments plus the depreciation and tax burdens of tools.
Choices, Choices
Every trucking company is unique, however it is nearly them to find funding solutions that meet their individual needs. Being informed on all your options is the first step toward finding the right cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444