Though often overlooked, the trucking industry is truly essential to the health for 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 from 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 tight budget, it might not be an option. Expenses like payroll and gas come 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 borrowing. 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 centered on the creditworthiness of the trucking company’s customers.
At the time of the sale, the client gets 80-90% belonging to the cash back immediately from the debts. The remainder of the balance comes after customer repayment, less a portion fee that typically ranges from 1-5%.
This options best for B2B businesses that cannot afford to wait for payment, as well as the cost is often 4-5% monthly with a powerful annual pace typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are often the cheapest associated with financing. Mortgage process involves an application and review of the company’s creditworthiness and financial story. Small companies especially will usually be refused for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s savings. This form of funding ideal for for trucking outfits having a great credit file and have no need for the money immediately.
Cash-Advances
Cash advances take place when an organization receives funding sum from our lender. The organization pays the lending company back with percentages of that monthly card receipts until the loan (plus a predetermined rate) is repaid. Happen to be legal limits to the rates, and they will cannot be changed retroactively. The benefits of cash advances is immediate cash- the time the fastest method for obtaining cash without going to a loan shark.
This financing method is the for trucking companies who need immediate cash for regarding amount of time and have limited financing options. Will not find is usually 20% if not more.
Lease-Back
A trucking company may choose to sell property, plant, and/or equipment, and simultaneously leases it back for resources.
It is best for trucking companies with valuable plant or equipment assets which usually underutilized, as well as the cost is monthly lease payments in addition to depreciation and tax burdens of tools.
Choices, Choices
Every trucking company is unique, that’s why it is nearly them to locate funding solutions that meet their individual needs. Being informed on all your options 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