Though often overlooked, the trucking industry is truly essential 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 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 problems. But for small to mid-size companies operating on a decent budget, it might stop being an option. Expenses since payroll and gas sum 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 flip to outside borrowing. The following are some options for trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to implies 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 amount of the sale, customer gets 80-90% of your cash back immediately from the invoices. 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 companies that cannot manage to wait for payment, and the cost is frequently 4-5% monthly with annual interest rate typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are an cheapest form of financing. The loan process involves an application and review of the company’s creditworthiness and financial story. Small companies especially tend to be denied for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s bank account. This form of funding is the for trucking outfits by using a great credit history and don’t want the money immediately.
Cash-Advances
Cash advances take place when an organization receives an advance sum from your local neighborhood lender. The organization pays the lending company back with percentages from their monthly card receipts before the loan (plus a predetermined rate) is repaid. There are a bunch legal limits to the rates, and also cannot be changed retroactively. The benefits of cash advances is immediate cash- occasion the fastest method for obtaining cash without in order to a loan shark.
This financing method is better for trucking companies who need immediate cash for the short amount of time and have limited financing options. The cost is usually 20% or more.
Lease-Back
A trucking company may wish 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 which usually underutilized, and also the cost is monthly lease payments as well as the depreciation and tax burdens of machines.
Choices, Choices
Every trucking company is unique, however it is nearly them to search out funding solutions that meet their individual needs. Being informed on all your options is one step toward finding a fitting cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444