Though often overlooked, the trucking industry is 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 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 controversy. But for small to mid-size companies operating on a strong budget, it might halt an option. Expenses like payroll and gas calculate 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 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 implies by which businesses sell their accounts receivables to a factoring company. Approval for factoring primarily based on the creditworthiness of the trucking company’s customers.
At the use of the sale, the client gets 80-90% for 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 firms that cannot afford to wait for payment, and the cost is often 4-5% monthly with an effective annual rate typically between 18-30%.
Bank Loans
Though tough to come by, bank loans are often the cheapest way of financing. Mortgage loan process involves an application and breakdown of the company’s creditworthiness and financial track record. Small companies especially will usually be refused for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s financial institution. This form of funding greatest for for trucking outfits using a great credit ratings and have no need for the money immediately.
Cash-Advances
Cash advances take place when a small business receives an advance sum from your local neighborhood lender. They pays financial institution back with percentages from their monthly card receipts prior to loan (plus a predetermined rate) is repaid. There are legal limits to the rates, and so they also cannot be changed retroactively. The advantage of cash advances is immediate cash- occasion the fastest method for obtaining cash without in order to a loan shark.
This financing method very best for trucking companies who need immediate cash for any amount of time and have limited financing options. The cost is usually 20% or more.
Lease-Back
A trucking company may want to sell property, plant, and/or equipment, and simultaneously leases it back for earnings.
It is best for trucking companies with valuable plant or equipment assets that are underutilized, and the cost is monthly lease payments not to mention the depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, that’s why it is close to them to find funding solutions that meet their individual needs. Being informed on all options is one step toward finding a worthwhile cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444