Though often overlooked, the trucking industry is vitally 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 controversy. But for small to mid-size companies operating on a strict budget, it might halt an option. Expenses since 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 actually not a recipe for financial hardship.
Therefore, trucking companies often have to show to outside borrowing. The following are some strategies to 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 duration of the sale, customer gets 80-90% of your cash back immediately from the bills. The remainder of the balance comes after customer repayment, less a portion fee that typically ranges from 1-5%.
This choices are best for B2B firms that cannot manage to wait for payment, as well as the cost usually 4-5% monthly with a healthy annual price typically between 18-30%.
Bank Loans
Though difficult 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 story. Small companies especially are more likely to be denied for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s banking. This form of funding greatest for for trucking outfits having a great credit history and don’t want the money immediately.
Cash-Advances
Cash advances take place when business receives an advance sum during a lender. Business pays financial institution back with percentages of their monthly card receipts prior to loan (plus a predetermined rate) is repaid. There are a bunch legal limits to the rates, which cannot be changed retroactively. The benefit to cash advances is immediate cash- is certainly the fastest method for obtaining cash without likely to a loan shark.
This financing method ideal for trucking companies who need immediate cash for regarding amount of one’s time and have limited financing options. Cost of is usually 20% or even more.
Lease-Back
A trucking company could sell property, plant, and/or equipment, and simultaneously leases it back for cash money.
It ideal for for trucking companies with valuable plant or equipment assets usually are underutilized, along with the cost is monthly lease payments plus the depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, make use of is nearly them to find funding solutions that meet their individual needs. Being informed on all possibilities is the first step toward finding a fitting cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444