Though often overlooked, the trucking industry is critical to the health belonging to 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 from 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 chore. But for small to mid-size companies operating on a strict budget, it might not be an option. Expenses such as payroll and gas add up in the time between payment, and not paying your drivers is never a good business 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 funding. The following are some strategies to 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 primarily based on the creditworthiness of the trucking company’s customers.
At the time of the sale, the client gets 80-90% of the cash back immediately from the bills. 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, and also the cost is usually 4-5% monthly with annual price typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are an cheapest involving financing. The borrowed funds process involves an application and review of the company’s creditworthiness and financial profile. Small companies especially are more likely to be turned down for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s bank account. This form of funding is better for trucking outfits with a great credit report . and have no need for the money immediately.
Cash-Advances
Cash advances take place when an organization receives funding sum from a lender. The company pays financial institution back with percentages regarding their monthly card receipts before the loan (plus a predetermined rate) is repaid. There are legal limits to the rates, and they will cannot be changed retroactively. The help cash advances is immediate cash- occasion the fastest method for obtaining cash without likely to a loan shark.
This financing method very best for trucking companies who need immediate cash for a much smaller amount of one’s time and have limited financing options. Will not find is usually 20% and up.
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 might be underutilized, as well as the cost is monthly lease payments as well as the depreciation and tax burdens of machines.
Choices, Choices
Every trucking company is unique, that’s why it is nearly them to locate funding solutions that meet their individual needs. Being informed on all the choices is begin step toward finding a sufficient cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444