Though often overlooked, the trucking industry is really important 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 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 chore. But for small to mid-size companies operating on a decent 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 practice. Add to that rising fuel costs, delays due to traffic congestion, driver shortages and new regulations, and this is a recipe for financial hardship.
Therefore, trucking companies often have flip to outside funding. 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 duration of the sale, the client 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 choices are best for B2B companies that cannot manage to wait for payment, and the cost usually 4-5% monthly with an effective annual rate typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are usually the cheapest type of financing. Mortgage process involves an application and review of the company’s creditworthiness and financial reports. Small companies especially will usually be turned down for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s banking. This form of funding greatest for for trucking outfits with a great credit history and don’t want the money immediately.
Cash-Advances
Cash advances take place when a small-business receives a loan sum from a lender. The company pays the lending company back with percentages of that monthly card receipts up to the loan (plus a predetermined rate) is repaid. Happen to be legal limits to the rates, and so they also cannot be changed retroactively. The benefits of cash advances is immediate cash- is certainly the fastest method for obtaining cash without likely to a loan shark.
This financing method ideal for trucking companies who require immediate cash for any amount of this time and have limited financing options. Cost of is usually 20% and up.
Lease-Back
A trucking company may want to sell property, plant, and/or equipment, and simultaneously leases it back for moola.
It very best for trucking companies with valuable plant or equipment assets which usually 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, that’s why it is nearly them inside your funding solutions that meet their individual needs. Being informed on all possibilities is initial step toward finding a suitable cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
Posted on:
September 18, 2019