Though often overlooked, the trucking industry is vitally important 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 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 problem. But for small to mid-size companies operating on a strong budget, it might stop an option. Expenses regarding payroll and gas sum up 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 definitely a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside a mortgage. 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 is founded on 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 bills. The remainder of the balance comes after customer repayment, less a percentage fee that typically ranges from 1-5%.
This options best for B2B businesses that cannot manage to wait for payment, and also the cost is often 4-5% monthly with an impressive annual rate typically between 18-30%.
Bank Loans
Though in order to come by, bank loans are these cheapest way of financing. The borrowed funds process involves an application and analysis of the company’s creditworthiness and financial track record. Small companies especially can be refused for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s life’s savings. This form of funding ideal for for trucking outfits having a great credit report . and do not require the money immediately.
Cash-Advances
Cash advances take place when a company receives a loan sum from a lender. The company pays loan provider back with percentages associated with their monthly card receipts just before loan (plus a predetermined rate) is repaid. There are legal limits to the rates, which cannot be changed retroactively. The benefits of cash advances is immediate cash- the time the fastest method for obtaining cash without going to a loan shark.
This financing method ideal for trucking companies who require immediate cash for a much smaller amount associated with your and have limited financing options. Cost of is usually 20% or more.
Lease-Back
A trucking company could sell property, plant, and/or equipment, and simultaneously leases it back for cash money.
It is best for trucking companies with valuable plant or equipment assets usually are underutilized, along with the cost is monthly lease payments not to mention the depreciation and tax burdens of tools.
Choices, Choices
Every trucking company is unique, and it is up to them to discover funding solutions that meet their individual needs. Being informed on all options is the first step toward finding a worthwhile cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444