Though often overlooked, the trucking industry is essential to the health for 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 problem. But for small to mid-size companies operating on a tight budget, it might stop an option. Expenses like payroll and gas come 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 flip to outside borrowing. The following are some methods 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 draws on on the creditworthiness of the trucking company’s customers.
At the time period of the sale, the client gets 80-90% belonging to the 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 choice is best for B2B businesses that cannot afford to wait for payment, as well as the cost is often 4-5% monthly with a healthy annual pace typically between 18-30%.
Bank Loans
Though difficult to come by, bank loans are most of the cheapest involving financing. Mortgage loan process involves an application and overview of the company’s creditworthiness and financial profile. Small companies especially tend to be rejected for loans, although exceptions do be around.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s bank account. This form of funding ideal for for trucking outfits having a great credit file and don’t want the money immediately.
Cash-Advances
Cash advances take place when business receives an advance sum from the lender. Business pays financial institution back with percentages regarding their monthly card receipts before the loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and also 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 need immediate cash for a short amount of one’s 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 cash money.
It is better for trucking companies with valuable plant or equipment assets usually are underutilized, along with the cost is monthly lease payments as well as the depreciation and tax burdens of gadget.
Choices, Choices
Every trucking company is unique, and in addition it is nearly them to search out funding solutions that meet their individual needs. Being informed on all the choices is one step toward finding a sufficient cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444