Though often overlooked, the trucking industry is essential 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 within 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 good budget, it might stop being an option. Expenses since 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 this is a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside backing. The following are some methods trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to difficult . 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, the client gets 80-90% belonging to the cash back immediately from the invoices. The remainder of the balance comes after customer repayment, less a portion fee that typically ranges from 1-5%.
This choices are best for B2B businesses that cannot afford to wait for payment, along with the cost is often 4-5% monthly with an impressive annual interest rate typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are these cheapest form of financing. The borrowed funds process involves an application and review of the company’s creditworthiness and financial story. Small companies especially possess a be thrown to the wolves for loans, although exceptions do be around.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s financial institution. This form of funding ideal for for trucking outfits using a great credit history and don’t require the money immediately.
Cash-Advances
Cash advances take place when business receives an advance sum from your local neighborhood lender. The company pays the lending company back with percentages associated with their monthly card receipts before the loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, and they will cannot be changed retroactively. The help cash advances is immediate cash- can be the fastest method for obtaining cash without gonna be a loan shark.
This financing method is best for trucking companies who require immediate cash for the short amount of this time and have limited financing options. Will not find is usually 20% if not more.
Lease-Back
A trucking company might want to sell property, plant, and/or equipment, and simultaneously leases it back for cash.
It ideal for trucking companies with valuable plant or equipment assets which might be underutilized, and also the cost is monthly lease payments not to mention the depreciation and tax burdens of resources.
Choices, Choices
Every trucking company is unique, and it is close to them to search out funding solutions that meet their individual needs. Being informed on all possibilities is the first step toward finding the right cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444