Though often overlooked, the trucking industry is essential 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 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 problems. But for small to mid-size companies operating on a decent budget, it might stop an option. Expenses with regard to example payroll and gas provide 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 this is a recipe for financial hardship.
Therefore, trucking companies often have to show to outside funding. 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 draws on 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 statements. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This option is best for B2B firms that cannot manage to wait for payment, and the cost is 4-5% monthly with an impressive annual price typically between 18-30%.
Bank Loans
Though tough to come by, bank loans are most of the cheapest type of financing. The loan process involves an application and analysis of the company’s creditworthiness and financial profile. Small companies especially can be thrown to the wolves for loans, although exceptions do be.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s bank account. This form of funding is better for trucking outfits using a great credit record and don’t need the money immediately.
Cash-Advances
Cash advances take place when business receives an advance sum from the lender. The company pays financial institution back with percentages of their monthly card receipts just before loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, and they cannot be changed retroactively. The benefit to cash advances is immediate cash- it is the fastest method for obtaining cash without in order to be a loan shark.
This financing method very best for trucking companies who require immediate cash for the short amount associated with your and have limited financing options. Cost of 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 moola.
It ideal for for trucking companies with valuable plant or equipment assets that are underutilized, and also the cost is monthly lease payments not to mention the depreciation and tax burdens of machines.
Choices, Choices
Every trucking company is unique, make use of is well over them to discover funding solutions that meet their individual needs. Being informed on all possibilities is customers step toward finding a worthwhile cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
Posted on:
September 18, 2019