Though often overlooked, the trucking industry is truly essential 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 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 tight budget, it might not be an option. Expenses since 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 is a recipe for financial hardship.
Therefore, trucking companies often have flip to outside funding. The following are some choices trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to might 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 amount of the sale, customer gets 80-90% of the cash back immediately from the statements. The remainder of the balance comes after customer repayment, less a percentage fee that typically ranges from 1-5%.
This options best for B2B firms that cannot afford to wait for payment, along with the cost is often 4-5% monthly with an effective annual price typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are most of the cheapest way of financing. The borrowed funds process involves an application and breakdown of the company’s creditworthiness and financial reports. Small companies especially tend to be turned down for loans, although exceptions do be.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s financial institution. This form of funding greatest for for trucking outfits using a great credit report . and have no need for the money immediately.
Cash-Advances
Cash advances take place when a small business receives a loan sum from our lender. They pays financial institution back with percentages from their monthly card receipts before the loan (plus a predetermined rate) is repaid. There are a bunch legal limits to the rates, which cannot be changed retroactively. The profit to cash advances is immediate cash- can be the fastest method for obtaining cash without gonna be a loan shark.
This financing method is better for trucking companies who need immediate cash for a much smaller amount of this time and have limited financing options. The cost is usually 20% if not more.
Lease-Back
A trucking company may want to sell property, plant, and/or equipment, and simultaneously leases it back for cash.
It very best for trucking companies with valuable plant or equipment assets which usually underutilized, and also the cost is monthly lease payments in addition to depreciation and tax burdens of tools.
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 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