Though often overlooked, the trucking industry is critical 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 problems. But for small to mid-size companies operating on a decent budget, it might ‘t be an option. Expenses like payroll and gas add up in the time between payment, and not paying your drivers is never a good business put into 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 to turn 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 draws on on the creditworthiness of the trucking company’s customers.
At the duration of the sale, the client gets 80-90% for this 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 choice is best for B2B companies that cannot afford to wait for payment, as well as the cost is often 4-5% monthly with annual interest rate typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are often the cheapest type of financing. The loan process involves an application and breakdown of the company’s creditworthiness and financial profile. Small companies especially tend to be rejected for loans, although exceptions do be around.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s life’s savings. This form of funding is best for trucking outfits with a great credit report . and don’t want the money immediately.
Cash-Advances
Cash advances take place when business receives a loan sum during a lender. The company pays the lending company back with percentages regarding their monthly card receipts until the loan (plus a predetermined rate) is repaid. There are a bunch legal limits to the rates, and so they also cannot be changed retroactively. The help cash advances is immediate cash- it is the fastest method for obtaining cash without going 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. Will not find is usually 20% or older.
Lease-Back
A trucking company may want to sell property, plant, and/or equipment, and simultaneously leases it back for resources.
It ideal for trucking companies with valuable plant or equipment assets that are underutilized, along with the cost is monthly lease payments plus the depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, make use of is nearly them inside your funding solutions that meet their individual needs. Being informed on all your options is customers step toward finding a sufficient cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444