Though often overlooked, the trucking industry is critical 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 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 huge concern. But for small to mid-size companies operating on a strict budget, it might ‘t be an option. Expenses like payroll and gas calculate 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 it is a recipe for financial hardship.
Therefore, trucking companies often have to show to outside backing. The following are some strategies to 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, customer gets 80-90% belonging to the cash back immediately from the debts. The remainder of the balance comes after customer repayment, less a percentage fee that typically ranges from 1-5%.
This option is best for B2B companies that cannot afford to wait for payment, and also the cost is often 4-5% monthly with a healthy annual rate typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are usually the cheapest form of financing. The loan process involves an application and review of the company’s creditworthiness and financial history. Small companies especially possess a be turned down for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s life’s savings. This form of funding is best for trucking outfits having a great credit ratings and don’t need the money immediately.
Cash-Advances
Cash advances take place when a small business receives a loan sum from your local neighborhood lender. They pays the lending company back with percentages associated with their monthly card receipts up to the loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, which cannot be changed retroactively. The benefit to cash advances is immediate cash- the time 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 any amount associated with your and have limited financing options. The cost is usually 20% and up.
Lease-Back
A trucking company might want to sell property, plant, and/or equipment, and simultaneously leases it back for resources.
It ideal for trucking companies with valuable plant or equipment assets which might be underutilized, as well as the cost is monthly lease payments not to mention the depreciation and tax burdens of resources.
Choices, Choices
Every trucking company is unique, make use of is up to them inside your funding solutions that meet their individual needs. Being informed on all your options is initial step toward finding a worthwhile cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444