Though often overlooked, the trucking industry is vitally important 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 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 strict budget, it might halt an option. Expenses such as payroll and gas come 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 turn to outside funding. The following are some strategies for trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to might 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 time of the sale, the client gets 80-90% of this cash back immediately from the invoices. The remainder of the balance comes after customer repayment, less a portion fee that typically ranges from 1-5%.
This option is best for B2B businesses that cannot manage to wait for payment, and the cost is 4-5% monthly with an impressive annual pace typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are these cheapest involving financing. The loan process involves an application and analysis of the company’s creditworthiness and financial story. Small companies especially can be refused for loans, although exceptions do be around.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s life’s savings. This form of funding ideal for for trucking outfits having a great credit report . and don’t require the money immediately.
Cash-Advances
Cash advances take place when a company receives a loan sum from a lender. They pays loan provider back with percentages associated with their monthly card receipts just before loan (plus a predetermined rate) is repaid. There are legal limits to the rates, and they cannot be changed retroactively. The benefit to cash advances is immediate cash- it is the fastest method for obtaining cash without going to a loan shark.
This financing method very best for trucking companies who require immediate cash for regarding amount of one’s time and have limited financing options. Cost of is usually 20% if not more.
Lease-Back
A trucking company could sell property, plant, and/or equipment, and simultaneously leases it back for cash.
It is best 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 tools.
Choices, Choices
Every trucking company is unique, however it is nearly them to discover funding solutions that meet their individual needs. Being informed on all options is the first step toward finding a suitable cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444