Though often overlooked, the trucking industry is critical 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 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 problem. But for small to mid-size companies operating on a strict budget, it might stop an option. Expenses such as payroll and gas calculate 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 a recipe for financial hardship.
Therefore, trucking companies often have to show to outside backing. 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 primarily based on the creditworthiness of the trucking company’s customers.
At the time period of the sale, the client gets 80-90% of this cash back immediately from the invoices. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This options best for B2B companies that cannot afford to wait for payment, as well as the cost is usually 4-5% monthly with a healthy annual interest rate typically between 18-30%.
Bank Loans
Though tough to come by, bank loans are an cheapest type of financing. The borrowed funds process involves an application and overview of the company’s creditworthiness and financial profile. Small companies especially tend to be rejected for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s savings. This form of funding greatest for for trucking outfits using a great credit report . and don’t want the money immediately.
Cash-Advances
Cash advances take place when an organization receives a loan sum from a lender. The corporate pays financial institution back with percentages associated with their monthly card receipts prior to loan (plus a predetermined rate) is repaid. There are a bunch legal limits to the rates, and they will cannot be changed retroactively. The benefit to cash advances is immediate cash- occasion the fastest method for obtaining cash without in order to be a loan shark.
This financing method is best for trucking companies who require immediate cash for a much smaller 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 cash money.
It ideal for trucking companies with valuable plant or equipment assets usually are underutilized, along with the cost is monthly lease payments additionally, the depreciation and tax burdens of machines.
Choices, Choices
Every trucking company is unique, and it is nearly them to discover funding solutions that meet their individual needs. Being informed on all options is one step toward finding a fitting cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444