Though often overlooked, the trucking industry is truly essential 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 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 problem. But for small to mid-size companies operating on a tight budget, it might not be an option. Expenses such as payroll and gas calculate in the time between payment, and not paying your drivers is never a good business repeat. 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 options for 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 centered on the creditworthiness of the trucking company’s customers.
At the time of the sale, the client gets 80-90% of your cash back immediately from the bills. The remainder of the balance comes after customer repayment, less a percentage fee that typically ranges from 1-5%.
This choices are best for B2B firms that cannot afford to wait for payment, along with the cost is often 4-5% monthly with an effective annual rate typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are usually the cheapest type of financing. Mortgage loan process involves an application and breakdown of the company’s creditworthiness and financial history. Small companies especially tend to be refused for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s life’s savings. This form of funding is the for trucking outfits having a great credit file and don’t require the money immediately.
Cash-Advances
Cash advances take place when a company receives an advance sum during a lender. The corporate pays loan provider back with percentages of their monthly card receipts until the loan (plus a predetermined rate) is repaid. Happen to be legal limits to the rates, and they will cannot be changed retroactively. The advantage of cash advances is immediate cash- can be 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 the short amount associated with your and have limited financing options. Costly is usually 20% and up.
Lease-Back
A trucking company may wish to sell property, plant, and/or equipment, and simultaneously leases it back for cash money.
It is best for trucking companies with valuable plant or equipment assets which might be underutilized, as well as the cost is monthly lease payments plus the depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, however it is up to them inside your funding solutions that meet their individual needs. Being informed on all the options is begin step toward finding a suitable cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
Posted on:
September 18, 2019