Though often overlooked, the trucking industry is really important 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 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 chore. But for small to mid-size companies operating on a decent budget, it might ‘t be an option. Expenses since payroll and gas come in the time between payment, and not paying your drivers is never a good business approach. 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 to turn to outside a mortgage. The following are some strategies for trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to carpet by which businesses sell their accounts receivables to a factoring company. Approval for factoring is based on the creditworthiness of the trucking company’s customers.
At the time of the sale, the client gets 80-90% for this 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 businesses that cannot manage to wait for payment, and also the cost is frequently 4-5% monthly with an effective annual fee typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are usually the cheapest way of financing. The money process involves an application and breakdown of the company’s creditworthiness and financial track record. Small companies especially can be refused for loans, although exceptions do be.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s bank account. This form of funding is best for trucking outfits with a great credit history and don’t require the money immediately.
Cash-Advances
Cash advances take place when a small-business receives funding sum during a lender. Business pays loan provider back with percentages of 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 help cash advances is immediate cash- is certainly the fastest method for obtaining cash without likely to a loan shark.
This financing method is better for trucking companies who require immediate cash for a short amount of one’s time and have limited financing options. Cost of 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 resources.
It very best for trucking companies with valuable plant or equipment assets that are underutilized, as well as the cost is monthly lease payments as well as the depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, however it is almost them to find funding solutions that meet their individual needs. Being informed on all the choices is the first step toward finding a sufficient cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444