Though often overlooked, the trucking industry is really important to the health of 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 chore. But for small to mid-size companies operating on a strict budget, it might not be an option. Expenses like payroll and gas add up in the time between payment, and not paying your drivers is never a good business put into practice. 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 to turn to outside financing. 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 centered on the creditworthiness of the trucking company’s customers.
At the time period 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 choice is best for B2B businesses that cannot afford to wait for payment, and also the cost is 4-5% monthly with a healthy annual price typically between 18-30%.
Bank Loans
Though in order to come by, bank loans are usually the cheapest type of financing. The borrowed funds process involves an application and analysis of the company’s creditworthiness and financial reports. Small companies especially are more likely to be turned down for loans, although exceptions do be around.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s financial institution. This form of funding ideal for for trucking outfits using a great credit file and don’t want the money immediately.
Cash-Advances
Cash advances take place when a company receives funding sum from your local neighborhood lender. The company pays the lending company back with percentages of their monthly card receipts up to the loan (plus a predetermined rate) is repaid. There are a bunch legal limits to the rates, which cannot be changed retroactively. The profit to cash advances is immediate cash- is certainly the fastest method for obtaining cash without in order to be a loan shark.
This financing method is the for trucking companies who require immediate cash for a short amount of one’s time and have limited financing options. The cost is usually 20% if not more.
Lease-Back
A trucking company could sell property, plant, and/or equipment, and simultaneously leases it back for resources.
It very best for trucking companies with valuable plant or equipment assets usually are underutilized, and also 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 nearly them to locate funding solutions that meet their individual needs. Being informed on all the choices is begin step toward finding the right cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
Posted on:
September 18, 2019