Though often overlooked, the trucking industry is vitally important to the health belonging to 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 the 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 strict budget, it might not be an option. Expenses regarding payroll and gas provide 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 actually not a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside borrowing. The following are some strategies to trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to implies 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 amount of the sale, the client gets 80-90% belonging to the cash back immediately from the debts. The remainder of the balance comes after customer repayment, less a portion fee that typically ranges from 1-5%.
This option is best for B2B firms that cannot afford to wait for payment, as well as the cost is usually 4-5% monthly with annual pace typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are most of the cheapest way of financing. The money process involves an application and analysis of the company’s creditworthiness and financial track record. Small companies especially possess a be thrown to the wolves for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s financial institution. This form of funding greatest for for trucking outfits using a great credit ratings and don’t want the money immediately.
Cash-Advances
Cash advances take place when an organization receives an advance sum from our lender. The company pays the lending company back with percentages from their monthly card receipts up to the loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and they will 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 the for trucking companies who need immediate cash for any amount your own time and have limited financing options. Cost of is usually 20% or more.
Lease-Back
A trucking company may want to sell property, plant, and/or equipment, and simultaneously leases it back for cash money.
It is better for trucking companies with valuable plant or equipment assets which usually underutilized, along with the cost is monthly lease payments not to mention the depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, that’s why it is up to them to locate funding solutions that meet their individual needs. Being informed on all options is initial step toward finding a fitting cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444