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 huge concern. But for small to mid-size companies operating on a tight budget, it might not be an option. Expenses like payroll and gas provide in the time between payment, and not paying your drivers is never a good business approach. 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 show to outside financing. The following are some strategies for trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to carpet by which businesses sell their accounts receivables to a factoring company. Approval for factoring draws on on the creditworthiness of the trucking company’s customers.
At the duration of the sale, customer gets 80-90% of your 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 options best for B2B companies that cannot afford to wait for payment, and the cost is 4-5% monthly with annual price typically between 18-30%.
Bank Loans
Though in order to come by, bank loans are most of the cheapest form of financing. Mortgage loan process involves an application and review of the company’s creditworthiness and financial track record. Small companies especially are more likely to be rejected for loans, although exceptions do live.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s financial institution. This form of funding is better for trucking outfits with a great credit file and have no need for the money immediately.
Cash-Advances
Cash advances take place when a small-business receives funding sum from the lender. They pays loan provider back with percentages of that 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- the time the fastest method for obtaining cash without in order to a loan shark.
This financing method is the for trucking companies who require immediate cash for regarding amount of 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 moola.
It ideal for trucking companies with valuable plant or equipment assets which usually underutilized, and the cost is monthly lease payments additionally, the depreciation and tax burdens of tools.
Choices, Choices
Every trucking company is unique, and it is nearly them inside your funding solutions that meet their individual needs. Being informed on all your options is initial step toward finding the right cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
Posted on:
September 18, 2019