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 huge concern. But for small to mid-size companies operating on a strong budget, it might ‘t be an option. Expenses since payroll and gas sum 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 it is a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside financing. The following are some strategies for 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 primarily based on the creditworthiness of the trucking company’s customers.
At the time period of the sale, the client gets 80-90% for this cash back immediately from the bills. The remainder of the balance comes after customer repayment, less a portion fee that typically ranges from 1-5%.
This options best for B2B companies that cannot afford to wait for payment, and the cost is 4-5% monthly with an effective annual pace typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are often the cheapest way of financing. Mortgage loan process involves an application and review of the company’s creditworthiness and financial story. Small companies especially tend to be refused for loans, although exceptions do be around.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s savings. This form of funding is best for trucking outfits with a great credit ratings and don’t need the money immediately.
Cash-Advances
Cash advances take place when an organization receives an advance sum from your local neighborhood lender. The corporate pays financial institution back with percentages associated with their monthly card receipts prior to loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and so they also cannot be changed retroactively. The help cash advances is immediate cash- occasion the fastest method for obtaining cash without going to a loan shark.
This financing method very best for trucking companies who require immediate cash for any amount of time and have limited financing options. Costly is usually 20% if not more.
Lease-Back
A trucking company could sell property, plant, and/or equipment, and simultaneously leases it back for moola.
It ideal for for trucking companies with valuable plant or equipment assets that are underutilized, and the cost is monthly lease payments plus the depreciation and tax burdens of gadget.
Choices, Choices
Every trucking company is unique, make use of is up to them to find funding solutions that meet their individual needs. Being informed on all the choices is the first step toward finding a suitable cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444