Though often overlooked, the trucking industry is critical 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 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 strong budget, it might halt an option. Expenses such as payroll and gas come 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 borrowing. The following are some strategies for trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to the process by which businesses sell their accounts receivables to a factoring company. Approval for factoring is based on the creditworthiness of the trucking company’s customers.
At the use of the sale, the client gets 80-90% belonging to the cash back immediately from the debts. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This choice is best for B2B businesses that cannot manage to wait for payment, and the cost is frequently 4-5% monthly with an impressive annual rate typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are often the cheapest form of financing. Mortgage loan process involves an application and athleanx workout review the company’s creditworthiness and financial track record. Small companies especially are more likely to be denied for loans, although exceptions do be around.
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 do not require the money immediately.
Cash-Advances
Cash advances take place when business receives an advance sum from your local neighborhood lender. The organization pays the lender back with percentages of their monthly card receipts up to the loan (plus a predetermined rate) is repaid. Happen to be legal limits to the rates, and also cannot be changed retroactively. The advantage of cash advances is immediate cash- the time the fastest method for obtaining cash without going 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. Will not find is usually 20% or older.
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 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, and in addition it is well over them to discover funding solutions that meet their individual needs. Being informed on all the choices is one step toward finding a sufficient cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444