Though often overlooked, the trucking industry is really important 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 the 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 chore. But for small to mid-size companies operating on a decent budget, it might halt 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 put into practice. Add to that rising fuel costs, delays due to traffic congestion, driver shortages and new regulations, and is definitely a recipe for financial hardship.
Therefore, trucking companies often have flip to outside funding. The following are some strategies to 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 centered on the creditworthiness of the trucking company’s customers.
At the time of the sale, customer gets 80-90% of this cash back immediately from the receipts. 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 businesses that cannot afford to wait for payment, and the cost is frequently 4-5% monthly with a healthy annual fee typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are an cheapest involving financing. Mortgage loan process involves an application and analysis of the company’s creditworthiness and financial profile. Small companies especially can be thrown to the wolves for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s life’s savings. This form of funding is better for trucking outfits having a great credit ratings and don’t require the money immediately.
Cash-Advances
Cash advances take place when business receives a loan sum during a lender. They pays the lending company back with percentages from their monthly card receipts prior to loan (plus a predetermined rate) is repaid. There are legal limits to the rates, and also cannot be changed retroactively. The benefit to cash advances is immediate cash- occasion the fastest method for obtaining cash without going to a loan shark.
This financing method is better for trucking companies who require immediate cash for any amount of one’s time and have limited financing options. Costly is usually 20% if not more.
Lease-Back
A trucking company may want to sell property, plant, and/or equipment, and simultaneously leases it back for cash.
It is better for trucking companies with valuable plant or equipment assets usually are underutilized, and the cost is monthly lease payments plus the depreciation and tax burdens of gadget.
Choices, Choices
Every trucking company is unique, however it is almost them to find funding solutions that meet their individual needs. Being informed on all the options is customers step toward finding a sufficient cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444