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 strict budget, it might stop being an option. Expenses since payroll and gas calculate 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 a mortgage. The following are some methods 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 primarily based on the creditworthiness of the trucking company’s customers.
At the time of the sale, the client gets 80-90% of your cash back immediately from the bills. The remainder of the balance comes after customer repayment, less a portion fee that typically ranges from 1-5%.
This choices are best for B2B companies that cannot manage to wait for payment, as well as the cost is 4-5% monthly with a healthy annual rate typically between 18-30%.
Bank Loans
Though in order to come by, bank loans are an cheapest way of financing. The borrowed funds process involves an application and breakdown of the company’s creditworthiness and financial track record. Small companies especially are more likely to be turned down for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s banking. This form of funding is best for trucking outfits having a great credit record and don’t require the money immediately.
Cash-Advances
Cash advances take place when a company receives funding sum from a lender. The organization pays the lender back with percentages of their monthly card receipts until the loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and they will cannot be changed retroactively. The benefits of cash advances is immediate cash- it is the fastest method for obtaining cash without going to a loan shark.
This financing method is better for trucking companies who require immediate cash for a much smaller amount of time and have limited financing options. Costly is usually 20% or even more.
Lease-Back
A trucking company could sell property, plant, and/or equipment, and simultaneously leases it back for resources.
It is better for trucking companies with valuable plant or equipment assets which might be 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, that’s why it is close to them to locate funding solutions that meet their individual needs. Being informed on all your options is one step toward finding a suitable cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444