Though often overlooked, the trucking industry is truly essential 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 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 problem. But for small to mid-size companies operating on a decent budget, it might halt 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 put into practice. Add to that rising fuel costs, delays due to traffic congestion, driver shortages and new regulations, and this is a recipe for financial hardship.
Therefore, trucking companies often have flip to outside backing. The following are some methods 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 centered on the creditworthiness of the trucking company’s customers.
At the time period of the sale, the client gets 80-90% of your cash back immediately from the statements. The remainder of the balance comes after customer repayment, less a percentage fee that typically ranges from 1-5%.
This choices best for B2B businesses that cannot manage to wait for payment, and the cost usually 4-5% monthly with a healthy annual price typically between 18-30%.
Bank Loans
Though tough to come by, bank loans are usually the cheapest type of financing. Mortgage loan process involves an application and breakdown of the company’s creditworthiness and financial story. Small companies especially will usually be rejected for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s banking. This form of funding ideal for for trucking outfits along with a great credit ratings and have no need for the money immediately.
Cash-Advances
Cash advances take place when an organization receives funding sum from the lender. Business pays the lending company back with percentages regarding their monthly card receipts just before loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, and they will cannot be changed retroactively. The benefits of cash advances is immediate cash- can be the fastest method for obtaining cash without in order to be a loan shark.
This financing method very best for trucking companies who require immediate cash for any amount of this time and have limited financing options. The cost is usually 20% and up.
Lease-Back
A trucking company could sell property, plant, and/or equipment, and simultaneously leases it back for earnings.
It is better for trucking companies with valuable plant or equipment assets which have been underutilized, along with the cost is monthly lease payments in addition to depreciation and tax burdens of gadget.
Choices, Choices
Every trucking company is unique, however it is almost them to discover funding solutions that meet their individual needs. Being informed on all options is customers step toward finding the right cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444