Though often overlooked, the trucking industry is truly essential to the health belonging to 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 huge concern. But for small to mid-size companies operating on a strong budget, it might stop being an option. Expenses such as payroll and gas sum up in the time between payment, and not paying your drivers is never a good business practice. 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 backing. The following are some strategies to trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to implies 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 amount of the sale, customer gets 80-90% of this cash back immediately from the receipts. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This choices are best for B2B companies that cannot manage to wait for payment, and the cost is usually 4-5% monthly with an effective annual fee typically between 18-30%.
Bank Loans
Though tough to come by, bank loans are usually the cheapest form of financing. The loan process involves an application and analysis of the company’s creditworthiness and financial story. 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 ideal for for trucking outfits by using a great credit history and don’t require the money immediately.
Cash-Advances
Cash advances take place when business receives funding sum from the lender. The organization pays loan provider back with percentages from their monthly card receipts before the loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and also cannot be changed retroactively. The help cash advances is immediate cash- is certainly the fastest method for obtaining cash without in order to a loan shark.
This financing method very best for trucking companies who require immediate cash for the short amount of one’s time and have limited financing options. Costly is usually 20% and up.
Lease-Back
A trucking company may want to sell property, plant, and/or equipment, and simultaneously leases it back for moola.
It is best for trucking companies with valuable plant or equipment assets which usually underutilized, and also the cost is monthly lease payments plus the depreciation and tax burdens of gadget.
Choices, Choices
Every trucking company is unique, that’s why it is close to them to search out funding solutions that meet their individual needs. Being informed on all the choices is one step toward finding a fitting cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
Posted on:
September 18, 2019