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 problem. But for small to mid-size companies operating on a good budget, it might halt an option. Expenses regarding payroll and gas calculate 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 is actually not a recipe for financial hardship.
Therefore, trucking companies often have to show to outside financing. The following are some options for trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to difficult . by which businesses sell their accounts receivables to a factoring company. Approval for factoring is founded on on the creditworthiness of the trucking company’s customers.
At the time period of the sale, customer gets 80-90% of your cash back immediately from the bills. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This choices best for B2B firms that cannot manage to wait for payment, along with the cost is usually 4-5% monthly with a healthy annual interest rate typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are usually the cheapest form of financing. The money process involves an application and overview of the company’s creditworthiness and financial history. Small companies especially possess a be turned down for loans, although exceptions do live.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s life’s savings. This form of funding greatest for for trucking outfits with a great credit report . and don’t want the money immediately.
Cash-Advances
Cash advances take place when a company receives a loan sum from a lender. They pays financial institution back with percentages regarding their monthly card receipts before the loan (plus a predetermined rate) is repaid. There are a bunch legal limits to the rates, and so they also cannot be changed retroactively. The advantage of cash advances is immediate cash- can be the fastest method for obtaining cash without gonna be a loan shark.
This financing method is best for trucking companies who require immediate cash for any amount of one’s time and have limited financing options. The cost is usually 20% or older.
Lease-Back
A trucking company may want to sell property, plant, and/or equipment, and simultaneously leases it back for moola.
It is better for trucking companies with valuable plant or equipment assets which might be underutilized, and the cost is monthly lease payments plus the depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, and it is close to them to find funding solutions that meet their individual needs. Being informed on all the options is begin step toward finding a suitable cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444