Though often overlooked, the trucking industry is really 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 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 strong budget, it might stop being an option. Expenses with regard to example payroll and gas provide 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 is definitely 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 is based on the creditworthiness of the trucking company’s customers.
At the duration of the sale, customer gets 80-90% for this cash back immediately from the statements. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This option is best for B2B businesses that cannot manage to wait for payment, and the cost usually 4-5% monthly with an effective annual rate typically between 18-30%.
Bank Loans
Though in order to come by, bank loans are often the cheapest type of financing. The borrowed funds process involves an application and athleanx workout review the company’s creditworthiness and financial history. Small companies especially tend to be refused for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s banking. This form of funding is the for trucking outfits along with a great credit report . and don’t need the money immediately.
Cash-Advances
Cash advances take place when an organization receives a loan sum from our lender. The company pays loan provider back with percentages regarding their monthly card receipts just before loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and so they also cannot be changed retroactively. The profit to cash advances is immediate cash- the time the fastest method for obtaining cash without likely to a loan shark.
This financing method is better for trucking companies who need immediate cash for a short amount of time and have limited financing options. Costly is usually 20% or even more.
Lease-Back
A trucking company could sell property, plant, and/or equipment, and simultaneously leases it back for cash money.
It is better for trucking companies with valuable plant or equipment assets that are underutilized, and also the cost is monthly lease payments plus the depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, however it is up to them to locate funding solutions that meet their individual needs. Being informed on all the options is initial step toward finding a fitting cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444