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 problem. But for small to mid-size companies operating on a strict budget, it might halt an option. Expenses regarding payroll and gas add up 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 is actually not a recipe for financial hardship.
Therefore, trucking companies often have flip to outside borrowing. The following are some options for trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to implies 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% of the cash back immediately from the receipts. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This option is best for B2B firms that cannot manage to wait for payment, as well as the cost is usually 4-5% monthly with a healthy annual fee typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are an cheapest way of financing. The money process involves an application and overview of the company’s creditworthiness and financial profile. Small companies especially will usually be rejected for loans, although exceptions do be.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s savings. This form of funding is the for trucking outfits with a great credit file and don’t need the money immediately.
Cash-Advances
Cash advances take place when a small business receives a loan sum from our lender. The corporate pays the lender back with percentages of their monthly card receipts until the loan (plus a predetermined rate) is repaid. There are legal limits to the rates, and they cannot be changed retroactively. The benefits of cash advances is immediate cash- is certainly the fastest method for obtaining cash without in order to a loan shark.
This financing method is the for trucking companies who require immediate cash for a much smaller amount your own time and have limited financing options. The cost is usually 20% and up.
Lease-Back
A trucking company could sell property, plant, and/or equipment, and simultaneously leases it back for earnings.
It very best for trucking companies with valuable plant or equipment assets which have been underutilized, along with the cost is monthly lease payments plus the depreciation and tax burdens of machines.
Choices, Choices
Every trucking company is unique, however it is up to them to discover funding solutions that meet their individual needs. Being informed on all options is begin step toward finding a suitable cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444