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 from 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 controversy. But for small to mid-size companies operating on a decent budget, it might halt an option. Expenses regarding payroll and gas calculate 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 to show to outside borrowing. The following are some strategies for 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 is founded on on the creditworthiness of the trucking company’s customers.
At the time of the sale, the client gets 80-90% of the cash back immediately from the debts. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This choice is best for B2B businesses that cannot afford to wait for payment, as well as the cost is often 4-5% monthly with an effective annual rate typically between 18-30%.
Bank Loans
Though in order to come by, bank loans are often the cheapest form of financing. The money process involves an application and analysis of the company’s creditworthiness and financial story. Small companies especially will usually be turned down for loans, although exceptions do be.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s life’s savings. This form of funding greatest for for trucking outfits with a great credit file and have no need for the money immediately.
Cash-Advances
Cash advances take place when a small business receives an advance sum from the lender. The corporate pays loan provider back with percentages associated with their monthly card receipts before the loan (plus a predetermined rate) is repaid. There are a bunch legal limits to the rates, and also cannot be changed retroactively. The advantage of cash advances is immediate cash- occasion the fastest method for obtaining cash without going to 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. Will not find is usually 20% if not more.
Lease-Back
A trucking company may choose to sell property, plant, and/or equipment, and simultaneously leases it back for earnings.
It ideal for 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 equipment.
Choices, Choices
Every trucking company is unique, and in addition it is well over them to discover funding solutions that meet their individual needs. Being informed on all the options is begin step toward finding a worthwhile cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444