Though often overlooked, the trucking industry is truly essential 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 controversy. But for small to mid-size companies operating on a strict budget, it might not be an option. Expenses since payroll and gas provide in the time between payment, and not paying your drivers is never a good business approach. 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 backing. The following are some strategies to 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 founded on on the creditworthiness of the trucking company’s customers.
At the use of the sale, customer gets 80-90% of this 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 choices best for B2B companies that cannot afford to wait for payment, and also the cost is 4-5% monthly with an effective annual pace typically between 18-30%.
Bank Loans
Though in order to come by, bank loans are these cheapest form of financing. The money process involves an application and analysis of the company’s creditworthiness and financial history. Small companies especially are more likely to be thrown to the wolves 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 best for trucking outfits having a great credit history and don’t want the money immediately.
Cash-Advances
Cash advances take place when an organization receives a loan sum from a lender. They pays the lending company back with percentages of that monthly card receipts up to 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- is certainly the fastest method for obtaining cash without in order to be a loan shark.
This financing method ideal for trucking companies who need immediate cash for any amount of time and have limited financing options. Costly is usually 20% and up.
Lease-Back
A trucking company might want to sell property, plant, and/or equipment, and simultaneously leases it back for resources.
It ideal for trucking companies with valuable plant or equipment assets which might be underutilized, as well as the cost is monthly lease payments as well as the depreciation and tax burdens of tools.
Choices, Choices
Every trucking company is unique, make use of is up to them to locate funding solutions that meet their individual needs. Being informed on all the choices is initial step toward finding the right cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444