Though often overlooked, the trucking industry is critical to the health belonging to 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 problems. But for small to mid-size companies operating on a strong budget, it might stop being an option. Expenses since payroll and gas calculate 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 this is a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside financing. The following are some choices trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to difficult . 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 time of the sale, the client gets 80-90% of this cash back immediately from the receipts. The remainder of the balance comes after customer repayment, less a percentage fee that typically ranges from 1-5%.
This options best for B2B companies that cannot manage to wait for payment, as well as the cost is frequently 4-5% monthly with a powerful annual pace typically between 18-30%.
Bank Loans
Though difficult to come by, bank loans are an cheapest associated with financing. The borrowed funds process involves an application and analysis of the company’s creditworthiness and financial story. Small companies especially can be turned down for loans, although exceptions do live.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s savings. This form of funding is the for trucking outfits with a great credit file and don’t need the money immediately.
Cash-Advances
Cash advances take place when a small business receives funding sum from your local neighborhood lender. The corporate pays financial institution back with percentages associated with their monthly card receipts before the loan (plus a predetermined rate) is repaid. There are legal limits to the rates, and also cannot be changed retroactively. The benefits of cash advances is immediate cash- the time the fastest method for obtaining cash without likely to a loan shark.
This financing method very best for trucking companies who need immediate cash for any amount of time and have limited financing options. Will not find is usually 20% or even more.
Lease-Back
A trucking company might want to 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, as well as the cost is monthly lease payments not to mention the depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, and it is close to them to locate funding solutions that meet their individual needs. Being informed on all your options 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