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 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 a chore. But for small to mid-size companies operating on a tight budget, it might ‘t 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 rehearsal. Add to that rising fuel costs, delays due to traffic congestion, driver shortages and new regulations, and is actually not a recipe for financial hardship.
Therefore, trucking companies often have to show to outside borrowing. The following are some choices 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 based on the creditworthiness of the trucking company’s customers.
At the duration of the sale, the client gets 80-90% of 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 choice is best for B2B companies that cannot afford to wait for payment, and the cost is 4-5% monthly with annual rate typically between 18-30%.
Bank Loans
Though in order to come by, bank loans are most of the cheapest associated with financing. The borrowed funds process involves an application and review of the company’s creditworthiness and financial story. Small companies especially are more likely to be refused for loans, although exceptions do be.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s bank account. This form of funding is best for trucking outfits along with a great credit ratings and don’t require the money immediately.
Cash-Advances
Cash advances take place when an organization receives a loan sum from the lender. The corporate pays loan provider back with percentages from their monthly card receipts prior to loan (plus a predetermined rate) is repaid. There are a bunch legal limits to the rates, and so they also cannot be changed retroactively. The profit to cash advances is immediate cash- can be the fastest method for obtaining cash without going to a loan shark.
This financing method very best for trucking companies who need immediate cash for any amount your own time and have limited financing options. Costly is usually 20% or even more.
Lease-Back
A trucking company may choose to sell property, plant, and/or equipment, and simultaneously leases it back for moola.
It is better for trucking companies with valuable plant or equipment assets that are underutilized, and the cost is monthly lease payments as well as the depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, however it is almost them inside your funding solutions that meet their individual needs. Being informed on all possibilities 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