Though often overlooked, the trucking industry is critical 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 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 controversy. But for small to mid-size companies operating on a tight budget, it might stop being an option. Expenses such as 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 actually not a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside borrowing. The following are some methods 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 of the sale, the client gets 80-90% of this cash back immediately from the receipts. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This option is best for B2B companies that cannot manage to wait for payment, as well as the cost is frequently 4-5% monthly with annual price typically between 18-30%.
Bank Loans
Though in order to come by, bank loans are usually 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 can be turned down for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s financial institution. This form of funding is best for trucking outfits with a great credit file and don’t want the money immediately.
Cash-Advances
Cash advances take place when a small business receives an advance sum from our lender. The company pays the lending company back with percentages associated with their monthly card receipts up to the loan (plus a predetermined rate) is repaid. There are legal limits to the rates, and 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 ideal for trucking companies who need immediate cash for the short amount of time and have limited financing options. The cost 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 cash.
It is better for trucking companies with valuable plant or equipment assets usually are underutilized, as well as the cost is monthly lease payments plus the depreciation and tax burdens of gadget.
Choices, Choices
Every trucking company is unique, and in addition it is nearly them inside your funding solutions that meet their individual needs. Being informed on all the options is begin step toward finding a sufficient cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444