Though often overlooked, the trucking industry is truly essential 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 within 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 good budget, it might halt an option. Expenses with regard to example payroll and gas calculate 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 is a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside funding. 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 use of the sale, customer gets 80-90% for this cash back immediately from the statements. The remainder of the balance comes after customer repayment, less a portion fee that typically ranges from 1-5%.
This choices are best for B2B companies that cannot afford to wait for payment, as well as the cost is 4-5% monthly with an effective annual pace typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are usually the cheapest form of financing. Mortgage loan process involves an application and breakdown of the company’s creditworthiness and financial story. Small companies especially are more likely to be refused for loans, although exceptions do be around.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s bank account. This form of funding is better for trucking outfits using a great credit history and have no need for the money immediately.
Cash-Advances
Cash advances take place when a company receives a loan sum from the lender. The organization pays the lending company back with percentages of their monthly card receipts before the loan (plus a predetermined rate) is repaid. Happen to be legal limits to the rates, and they cannot be changed retroactively. The benefit to cash advances is immediate cash- is certainly the fastest method for obtaining cash without in order to a loan shark.
This financing method is better for trucking companies who need immediate cash for a short amount of this time and have limited financing options. Will not find is usually 20% if not more.
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 usually underutilized, and also the cost is monthly lease payments plus the depreciation and tax burdens of tools.
Choices, Choices
Every trucking company is unique, and in addition it is close to them to search out funding solutions that meet their individual needs. Being informed on all your 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