Though often overlooked, the trucking industry is really important to the health on 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 within 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 controversy. But for small to mid-size companies operating on a strong budget, it might ‘t be 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 this is a recipe for financial hardship.
Therefore, trucking companies often have flip to outside financing. 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 based on the creditworthiness of the trucking company’s customers.
At the time period of the sale, customer gets 80-90% of the cash back immediately from the debts. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This options best for B2B firms that cannot afford to wait for payment, and also the cost is frequently 4-5% monthly with a powerful annual price typically between 18-30%.
Bank Loans
Though tough to come by, bank loans are these cheapest involving financing. Mortgage process involves an application and review of the company’s creditworthiness and financial reports. Small companies especially will usually be denied for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s banking. This form of funding greatest for for trucking outfits having a great credit ratings and don’t need the money immediately.
Cash-Advances
Cash advances take place when an organization receives funding sum from a lender. The corporate pays the lender back with percentages regarding their monthly card receipts prior to loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, and so they also cannot be changed retroactively. The advantage of cash advances is immediate cash- the time the fastest method for obtaining cash without in order to be a loan shark.
This financing method is the for trucking companies who require immediate cash for any amount of time and have limited financing options. The cost is usually 20% and up.
Lease-Back
A trucking company may choose to sell property, plant, and/or equipment, and simultaneously leases it back for resources.
It ideal for trucking companies with valuable plant or equipment assets usually are underutilized, and also the cost is monthly lease payments in addition to depreciation and tax burdens of machines.
Choices, Choices
Every trucking company is unique, that’s why it is up to them to find funding solutions that meet their individual needs. Being informed on all options is the first step toward finding a sufficient cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444