Though often overlooked, the trucking industry is critical 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 tight budget, it might stop being an option. Expenses regarding payroll and gas sum up 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 a recipe for financial hardship.
Therefore, trucking companies often have to show to outside financing. 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 draws on on the creditworthiness of the trucking company’s customers.
At the amount 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 share fee that typically ranges from 1-5%.
This choices are best for B2B firms that cannot manage to wait for payment, along with the cost is often 4-5% monthly with an impressive annual interest rate typically between 18-30%.
Bank Loans
Though in order to come by, bank loans are these cheapest associated with financing. The money process involves an application and breakdown of the company’s creditworthiness and financial story. Small companies especially can be turned down for loans, although exceptions do be around.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s bank account. This form of funding greatest for for trucking outfits with a great credit ratings and have no need for the money immediately.
Cash-Advances
Cash advances take place when business receives funding sum from our lender. They pays financial institution back with percentages associated with their monthly card receipts until the loan (plus a predetermined rate) is repaid. Happen to be legal limits to the rates, and they cannot be changed retroactively. The profit to cash advances is immediate cash- the time the fastest method for obtaining cash without in order to be a loan shark.
This financing method very best for trucking companies who require immediate cash for regarding amount of time and have limited financing options. The cost is usually 20% or more.
Lease-Back
A trucking company may wish to sell property, plant, and/or equipment, and simultaneously leases it back for earnings.
It is better for trucking companies with valuable plant or equipment assets which have been 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, and in addition it is almost them to search out funding solutions that meet their individual needs. Being informed on all the 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