Though often overlooked, the trucking industry is vitally important to the health of 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 good budget, it might ‘t be an option. Expenses with regard to example payroll and gas provide 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 it is a recipe for financial hardship.
Therefore, trucking companies often have flip to outside financing. The following are some options for trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to implies 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 amount of the sale, the client gets 80-90% for this cash back immediately from the statements. The remainder of the balance comes after customer repayment, less a percentage fee that typically ranges from 1-5%.
This choices are best for B2B businesses that cannot afford to wait for payment, and also the cost is usually 4-5% monthly with a healthy annual price typically between 18-30%.
Bank Loans
Though tough to come by, bank loans are these cheapest way of financing. The loan process involves an application and overview of the company’s creditworthiness and financial track record. Small companies especially will usually be rejected 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 with a great credit ratings and don’t require the money immediately.
Cash-Advances
Cash advances take place when an organization receives funding sum from a lender. The company pays loan provider back with percentages associated with their monthly card receipts up to the loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, and they will cannot be changed retroactively. The benefits of cash advances is immediate cash- is certainly 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 one’s time and have limited financing options. The cost is usually 20% and up.
Lease-Back
A trucking company may wish to sell property, plant, and/or equipment, and simultaneously leases it back for cash money.
It is best for trucking companies with valuable plant or equipment assets that are underutilized, along with the cost is monthly lease payments in addition to depreciation and tax burdens of tools.
Choices, Choices
Every trucking company is unique, however it is close to them to find 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