Though often overlooked, the trucking industry is truly 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 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 strong budget, it might stop an option. Expenses like payroll and gas calculate in the time between payment, and not paying your drivers is never a good business practice. 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 borrowing. The following are some methods 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 of the sale, the client gets 80-90% of the cash back immediately from the bills. The remainder of the balance comes after customer repayment, less a portion fee that typically ranges from 1-5%.
This choice is best for B2B firms that cannot manage to wait for payment, as well as the cost is 4-5% monthly with an effective annual rate typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are most of the cheapest way of financing. Mortgage process involves an application and review of the company’s creditworthiness and financial history. Small companies especially are more likely to be rejected for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s banking. This form of funding greatest for for trucking outfits having a great credit record and do not require the money immediately.
Cash-Advances
Cash advances take place when business receives funding sum from your local neighborhood lender. Business pays the lender back with percentages of their monthly card receipts prior to loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and also cannot be changed retroactively. The benefits of cash advances is immediate cash- can be the fastest method for obtaining cash without going to a loan shark.
This financing method is best for trucking companies who require immediate cash for any amount of time and have limited financing options. The cost is usually 20% if not more.
Lease-Back
A trucking company may choose to sell property, plant, and/or equipment, and simultaneously leases it back for resources.
It is better for trucking companies with valuable plant or equipment assets which might be underutilized, and also the cost is monthly lease payments not to mention the depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, make use of is up to them to locate funding solutions that meet their individual needs. Being informed on all your options is initial step toward finding a fitting cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444