Though often overlooked, the trucking industry is truly essential to the health within 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 from 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 halt an option. Expenses regarding payroll and gas sum up 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 it is a recipe for financial hardship.
Therefore, trucking companies often have flip to outside funding. 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 based on the creditworthiness of the trucking company’s customers.
At the duration of the sale, customer gets 80-90% of the 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 choices best for B2B firms that cannot manage to wait for payment, along with the cost is frequently 4-5% monthly with a healthy annual fee typically between 18-30%.
Bank Loans
Though tough to come by, bank loans are most of the cheapest way of financing. The loan process involves an application and review of the company’s creditworthiness and financial history. Small companies especially tend to be rejected for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s savings. This form of funding is the for trucking outfits along with a great credit record and don’t need the money immediately.
Cash-Advances
Cash advances take place when a company receives an advance sum from a lender. The corporate 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 they cannot be changed retroactively. The help cash advances is immediate cash- it is the fastest method for obtaining cash without going to a loan shark.
This financing method is better for trucking companies who need immediate cash for regarding amount associated with your and have limited financing options. Will not find is usually 20% if not more.
Lease-Back
A trucking company may wish to sell property, plant, and/or equipment, and simultaneously leases it back for earnings.
It ideal for trucking companies with valuable plant or equipment assets which might be underutilized, as well as the cost is monthly lease payments plus the depreciation and tax burdens of resources.
Choices, Choices
Every trucking company is unique, make use of is almost them to discover funding solutions that meet their individual needs. Being informed on all options is the first step toward finding a sufficient cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444