Though often overlooked, the trucking industry is essential to the health on 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 an option. Expenses like payroll and gas come 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 borrowing. The following are some choices 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 founded on on the creditworthiness of the trucking company’s customers.
At the use of the sale, customer gets 80-90% for this cash back immediately from the receipts. The remainder of the balance comes after customer repayment, less a portion fee that typically ranges from 1-5%.
This choices best for B2B companies that cannot manage to wait for payment, and also the cost is frequently 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 an cheapest involving financing. Mortgage process involves an application and overview of the company’s creditworthiness and financial story. Small companies especially can be denied for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s savings. This form of funding is best for trucking outfits with a great credit history and don’t want the money immediately.
Cash-Advances
Cash advances take place when a small-business receives a loan sum from a lender. The company pays the lender back with percentages associated with their monthly card receipts up to the 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 benefits of cash advances is immediate cash- the time the fastest method for obtaining cash without in order to be a loan shark.
This financing method is the for trucking companies who need immediate cash for regarding amount of this time and have limited financing options. Cost of is usually 20% if not more.
Lease-Back
A trucking company could sell property, plant, and/or equipment, and simultaneously leases it back for earnings.
It is better for trucking companies with valuable plant or equipment assets which have been underutilized, and the cost is monthly lease payments as well as the depreciation and tax burdens of gadget.
Choices, Choices
Every trucking company is unique, that’s why it is well over them to discover funding solutions that meet their individual needs. Being informed on all your options 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