Though often overlooked, the trucking industry is vitally important 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 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 problem. But for small to mid-size companies operating on a strict budget, it might not be an option. Expenses like 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 actually not a recipe for financial hardship.
Therefore, trucking companies often have flip to outside financing. 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 centered on the creditworthiness of the trucking company’s customers.
At the time period of the sale, customer gets 80-90% belonging to the cash back immediately from the statements. The remainder of the balance comes after customer repayment, less a percentage fee that typically ranges from 1-5%.
This option is best for B2B firms that cannot manage to wait for payment, and the cost is usually 4-5% monthly with an impressive annual interest rate typically between 18-30%.
Bank Loans
Though tough to come by, bank loans are usually the cheapest involving financing. Mortgage process involves an application and breakdown of the company’s creditworthiness and financial history. Small companies especially possess a be refused for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s savings. This form of funding ideal for for trucking outfits along with a great credit history and do not require the money immediately.
Cash-Advances
Cash advances take place when business receives funding sum during a lender. The company pays financial institution back with percentages regarding their monthly card receipts up to the loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and they cannot be changed retroactively. The benefits of cash advances is immediate cash- it is the fastest method for obtaining cash without likely to a loan shark.
This financing method very best for trucking companies who require immediate cash for a short amount associated with your and have limited financing options. Costly is usually 20% and up.
Lease-Back
A trucking company may want to sell property, plant, and/or equipment, and simultaneously leases it back for cash money.
It ideal for trucking companies with valuable plant or equipment assets which have been underutilized, and the cost is monthly lease payments plus the depreciation and tax burdens of tools.
Choices, Choices
Every trucking company is unique, and it is nearly them to locate funding solutions that meet their individual needs. Being informed on all your options is the first step toward finding a fitting cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444