Though often overlooked, the trucking industry is critical to the health on 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 since payroll and gas sum up 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 this is a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside backing. The following are some options for 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 founded on on the creditworthiness of the trucking company’s customers.
At the use of the sale, customer gets 80-90% of this cash back immediately from the statements. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This options best for B2B businesses that cannot manage to wait for payment, and the cost is frequently 4-5% monthly with an impressive annual price typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are usually the cheapest form of financing. Mortgage process involves an application and review of the company’s creditworthiness and financial story. Small companies especially will usually be refused for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s savings. This form of funding is better for trucking outfits with a great credit record and have no need for the money immediately.
Cash-Advances
Cash advances take place when a company receives funding sum from your local neighborhood lender. The corporate pays the lending company back with percentages of that monthly card receipts until the loan (plus a predetermined rate) is repaid. There are legal limits to the rates, and they will cannot be changed retroactively. The help cash advances is immediate cash- it is the fastest method for obtaining cash without going to a loan shark.
This financing method ideal for trucking companies who require immediate cash for the short amount of one’s time and have limited financing options. Costly is usually 20% or even more.
Lease-Back
A trucking company may want to sell property, plant, and/or equipment, and simultaneously leases it back for moola.
It ideal for trucking companies with valuable plant or equipment assets usually are underutilized, as well as the cost is monthly lease payments as well as the depreciation and tax burdens of resources.
Choices, Choices
Every trucking company is unique, and it is well over them to search out funding solutions that meet their individual needs. Being informed on all possibilities 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