Though often overlooked, the trucking industry is critical 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 huge concern. But for small to mid-size companies operating on a strong budget, it might stop an option. Expenses such as payroll and gas provide 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 definitely a recipe for financial hardship.
Therefore, trucking companies often have flip to outside borrowing. The following are some strategies for trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to might 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 amount of the sale, customer gets 80-90% of this cash back immediately from the statements. The remainder of the balance comes after customer repayment, less a percentage fee that typically ranges from 1-5%.
This choices best for B2B firms that cannot manage to wait for payment, and the cost is often 4-5% monthly with an effective annual pace typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are most of the cheapest type of financing. Mortgage loan process involves an application and athleanx workout review the company’s creditworthiness and financial story. Small companies especially will usually be denied for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s savings. This form of funding is best for trucking outfits using a great credit ratings and do not require the money immediately.
Cash-Advances
Cash advances take place when business receives funding sum from the lender. The company pays loan provider back with percentages from their monthly card receipts until the loan (plus a predetermined rate) is repaid. There are legal limits to the rates, and they will cannot be changed retroactively. The benefits of cash advances is immediate cash- can be the fastest method for obtaining cash without gonna be a loan shark.
This financing method is better for trucking companies who require 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 might want to sell property, plant, and/or equipment, and simultaneously leases it back for moola.
It ideal for trucking companies with valuable plant or equipment assets that are underutilized, as well as 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 well over them to search out funding solutions that meet their individual needs. Being informed on all the options is initial step toward finding a fitting cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444