Though often overlooked, the trucking industry is vitally 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 problem. But for small to mid-size companies operating on a decent budget, it might stop an option. Expenses such as payroll and gas add up in the time between payment, and not paying your drivers is never a good business repeat. 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 turn 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 the process 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 of the sale, customer gets 80-90% for this cash back immediately from the receipts. 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 companies that cannot afford to wait for payment, along with the cost is often 4-5% monthly with an effective annual pace typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are usually the cheapest type of financing. The borrowed funds process involves an application and analysis of the company’s creditworthiness and financial reports. Small companies especially are more likely to be thrown to the wolves for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s banking. This form of funding greatest for for trucking outfits by using a great credit file and have no need for the money immediately.
Cash-Advances
Cash advances take place when business receives a loan sum from your local neighborhood lender. The corporate pays financial institution back with percentages from their monthly card receipts just before loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and they 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 best for trucking companies who need immediate cash for any amount of one’s time and have limited financing options. Costly 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 which might be underutilized, along with the cost is monthly lease payments as well as the depreciation and tax burdens of gadget.
Choices, Choices
Every trucking company is unique, however it is well over them to discover funding solutions that meet their individual needs. Being informed on all options is begin step toward finding a fitting cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444