Though often overlooked, the trucking industry is really important to the health on 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 chore. But for small to mid-size companies operating on a strong budget, it might stop an option. Expenses regarding payroll and gas calculate in the time between payment, and not paying your drivers is never a good business rehearsal. 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 choices 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 period of the sale, customer gets 80-90% of this 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 options best for B2B businesses that cannot manage to wait for payment, and the cost is usually 4-5% monthly with a healthy annual rate typically between 18-30%.
Bank Loans
Though tough to come by, bank loans are most of the cheapest involving financing. Mortgage loan process involves an application and analysis of the company’s creditworthiness and financial story. Small companies especially possess a be thrown to the wolves for loans, although exceptions do be.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s financial institution. This form of funding is the for trucking outfits having a great credit ratings and have no need for the money immediately.
Cash-Advances
Cash advances take place when an organization receives an advance sum from the lender. Business pays financial institution back with percentages of that monthly card receipts before the loan (plus a predetermined rate) is repaid. Happen to be legal limits to the rates, and they will cannot be changed retroactively. The benefits of cash advances is immediate cash- occasion the fastest method for obtaining cash without gonna be a loan shark.
This financing method is better for trucking companies who need immediate cash for regarding amount of time and have limited financing options. Costly is usually 20% if not more.
Lease-Back
A trucking company may choose to sell property, plant, and/or equipment, and simultaneously leases it back for moola.
It ideal for for trucking companies with valuable plant or equipment assets which have been underutilized, and also the cost is monthly lease payments in addition to depreciation and tax burdens of tools.
Choices, Choices
Every trucking company is unique, and in addition it is well over them to search out funding solutions that meet their individual needs. Being informed on all the options is one step toward finding a suitable cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444