Though often overlooked, the trucking industry is essential 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 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 problems. But for small to mid-size companies operating on a strict budget, it might not be an option. Expenses since payroll and gas sum up in the time between payment, and not paying your drivers is never a good business repeat. 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 borrowing. The following are some strategies to 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 is based on the creditworthiness of the trucking company’s customers.
At the time period of the sale, customer gets 80-90% of the cash back immediately from the debts. The remainder of the balance comes after customer repayment, less a percentage fee that typically ranges from 1-5%.
This choices are best for B2B businesses that cannot manage to wait for payment, as well as the cost is often 4-5% monthly with annual rate typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are often the cheapest involving financing. Mortgage loan process involves an application and breakdown of the company’s creditworthiness and financial reports. Small companies especially are more likely to be refused for loans, although exceptions do be around.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s bank account. This form of funding is best for trucking outfits along with a great credit file and have no need for the money immediately.
Cash-Advances
Cash advances take place when a small-business receives a loan sum from the lender. The company pays loan provider back with percentages associated with their monthly card receipts just before loan (plus a predetermined rate) is repaid. Happen to be legal limits to the rates, which cannot be changed retroactively. The benefit to cash advances is immediate cash- can be the fastest method for obtaining cash without in order to a loan shark.
This financing method is better for trucking companies who require immediate cash for the short amount of this time and have limited financing options. Cost of 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 earnings.
It very 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 equipment.
Choices, Choices
Every trucking company is unique, however it is nearly them to locate funding solutions that meet their individual needs. Being informed on all your options is initial step toward finding a suitable cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444