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 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 chore. But for small to mid-size companies operating on a strict budget, it might stop being an option. Expenses such as payroll and gas add up 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 backing. 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 centered on the creditworthiness of the trucking company’s customers.
At the duration of the sale, customer gets 80-90% for this cash back immediately from the bills. The remainder of the balance comes after customer repayment, less a percentage fee that typically ranges from 1-5%.
This option is best for B2B businesses that cannot manage to wait for payment, and also the cost is usually 4-5% monthly with a powerful annual interest rate typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are often the cheapest way of financing. Mortgage process involves an application and review of the company’s creditworthiness and financial history. Small companies especially will usually be refused for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s banking. This form of funding is better for trucking outfits by using a great credit ratings and do not require the money immediately.
Cash-Advances
Cash advances take place when business receives an advance sum from your local neighborhood lender. The corporate pays loan provider back with percentages associated with their monthly card receipts just before loan (plus a predetermined rate) is repaid. There are a bunch legal limits to the rates, and so they also cannot be changed retroactively. The benefit to cash advances is immediate cash- the time the fastest method for obtaining cash without gonna be a loan shark.
This financing method is the for trucking companies who require immediate cash for any amount of one’s time and have limited financing options. Cost of is usually 20% and up.
Lease-Back
A trucking company might want to sell property, plant, and/or equipment, and simultaneously leases it back for moola.
It is better for trucking companies with valuable plant or equipment assets that are underutilized, as well as the cost is monthly lease payments plus the depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, that’s why it is nearly them to search out funding solutions that meet their individual needs. Being informed on all options is begin step toward finding a worthwhile cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444