Though often overlooked, the trucking industry is vitally important to the health of 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 huge concern. But for small to mid-size companies operating on a good budget, it might not be an option. Expenses such as payroll and gas add up in the time between payment, and not paying your drivers is never a good business repeat. Add to that rising fuel costs, delays due to traffic congestion, driver shortages and new regulations, and it is a recipe for financial hardship.
Therefore, trucking companies often have to show 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 implies by which businesses sell their accounts receivables to a factoring company. Approval for factoring centered on the creditworthiness of the trucking company’s customers.
At the time period of the sale, customer gets 80-90% of the cash back immediately from the invoices. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This choices best for B2B firms that cannot manage to wait for payment, and the cost is usually 4-5% monthly with a healthy annual fee typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are these cheapest way of financing. Mortgage loan process involves an application and review of the company’s creditworthiness and financial history. Small companies especially will usually be refused for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s financial institution. This form of funding is best for trucking outfits along with a great credit history and don’t require the money immediately.
Cash-Advances
Cash advances take place when business receives an advance sum from a lender. The company pays the lending company back with percentages regarding their monthly card receipts up to the loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, and they cannot be changed retroactively. The help cash advances is immediate cash- is certainly the fastest method for obtaining cash without gonna be a loan shark.
This financing method very best for trucking companies who require immediate cash for a short amount of one’s time and have limited financing options. Will not find is usually 20% if not more.
Lease-Back
A trucking company could sell property, plant, and/or equipment, and simultaneously leases it back for cash money.
It is better for trucking companies with valuable plant or equipment assets which usually underutilized, and the cost is monthly lease payments in addition to depreciation and tax burdens of machines.
Choices, Choices
Every trucking company is unique, that’s why it is almost them to find funding solutions that meet their individual needs. Being informed on all options is customers step toward finding a fitting cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444