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 in the 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 with regard to example payroll and gas come 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 is actually not a recipe for financial hardship.
Therefore, trucking companies often have to show to outside a mortgage. 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 draws on on the creditworthiness of the trucking company’s customers.
At the amount of the sale, customer gets 80-90% of 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 option is best for B2B firms that cannot manage to wait for payment, as well as the cost usually 4-5% monthly with annual rate typically between 18-30%.
Bank Loans
Though difficult to come by, bank loans are most of the cheapest involving financing. The borrowed funds process involves an application and analysis of the company’s creditworthiness and financial track record. Small companies especially are more likely to be refused for loans, although exceptions do live.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s savings. This form of funding is the for trucking outfits with a great credit report . and don’t require the money immediately.
Cash-Advances
Cash advances take place when an organization receives funding sum from our lender. The corporate pays loan provider back with percentages of that monthly card receipts just before loan (plus a predetermined rate) is repaid. Happen to be 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 going to a loan shark.
This financing method is better for trucking companies who require immediate cash for a short amount of this time and have limited financing options. Costly is usually 20% or more.
Lease-Back
A trucking company could sell property, plant, and/or equipment, and simultaneously leases it back for earnings.
It is better for trucking companies with valuable plant or equipment assets which have been underutilized, and also the cost is monthly lease payments as well as the depreciation and tax burdens of equipment.
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 options is customers step toward finding the right cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444