Though often overlooked, the trucking industry is critical to the health within 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 problem. But for small to mid-size companies operating on a decent budget, it might stop being an option. Expenses like payroll and gas calculate in the time between payment, and not paying your drivers is never a good business repeat. Add to that rising fuel costs, delays due to traffic congestion, driver shortages and new regulations, and it is a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside backing. 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 centered on the creditworthiness of the trucking company’s customers.
At the use of the sale, the client gets 80-90% of the cash back immediately from the debts. 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 businesses that cannot afford to wait for payment, and the cost is usually 4-5% monthly with an effective annual interest rate typically between 18-30%.
Bank Loans
Though in order to come by, bank loans are these cheapest form of financing. Mortgage loan process involves an application and breakdown of the company’s creditworthiness and financial profile. Small companies especially can be turned down for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s banking. This form of funding greatest for for trucking outfits having a great credit file and don’t need the money immediately.
Cash-Advances
Cash advances take place when business receives a loan sum from a lender. The organization pays financial institution back with percentages from their monthly card receipts until the loan (plus a predetermined rate) is repaid. There are legal limits to the rates, which cannot be changed retroactively. The benefits of cash advances is immediate cash- occasion the fastest method for obtaining cash without gonna be a loan shark.
This financing method very best for trucking companies who need immediate cash for a much smaller amount associated with your and have limited financing options. Will not find is usually 20% and up.
Lease-Back
A trucking company may wish to 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 additionally, the depreciation and tax burdens of resources.
Choices, Choices
Every trucking company is unique, however it is well over them to search out funding solutions that meet their individual needs. Being informed on all your options is one step toward finding a suitable cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444