Though often overlooked, the trucking industry is essential 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 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 problems. But for small to mid-size companies operating on a decent budget, it might not be an option. Expenses such as payroll and gas sum up 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 is a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside borrowing. The following are some strategies to trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to difficult . 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% belonging to the 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 choice is best for B2B firms that cannot manage to wait for payment, and also the cost is frequently 4-5% monthly with an effective annual pace typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are an cheapest associated with financing. The borrowed funds process involves an application and review of the company’s creditworthiness and financial profile. Small companies especially possess a be denied for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s financial institution. This form of funding is best for trucking outfits by using a great credit file and have no need for the money immediately.
Cash-Advances
Cash advances take place when a small business receives an advance sum during a lender. Business pays loan provider back with percentages from their monthly card receipts prior to loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and they cannot be changed retroactively. The benefits of cash advances is immediate cash- occasion the fastest method for obtaining cash without gonna be a loan shark.
This financing method very best for trucking companies who need immediate cash for any amount your own time and have limited financing options. Will not find is usually 20% or more.
Lease-Back
A trucking company may want to sell property, plant, and/or equipment, and simultaneously leases it back for cash.
It is best for trucking companies with valuable plant or equipment assets which usually underutilized, and also the cost is monthly lease payments plus the depreciation and tax burdens of resources.
Choices, Choices
Every trucking company is unique, and it is well over them to find funding solutions that meet their individual needs. Being informed on all the choices is one step toward finding a sufficient cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444