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 good budget, it might halt an option. Expenses with regard to example payroll and gas add 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 it 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 carpet 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 time of the sale, the client gets 80-90% of this cash back immediately from the bills. The remainder of the balance comes after customer repayment, less a percentage fee that typically ranges from 1-5%.
This choices best for B2B companies that cannot manage to wait for payment, and the cost is often 4-5% monthly with an impressive annual fee typically between 18-30%.
Bank Loans
Though difficult to come by, bank loans are usually the cheapest form of financing. Mortgage loan process involves an application and review of the company’s creditworthiness and financial reports. Small companies especially will usually be refused for loans, although exceptions do be around.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s bank account. This form of funding is the for trucking outfits with a great credit file and don’t want the money immediately.
Cash-Advances
Cash advances take place when an organization receives a loan sum during a lender. Business pays the lender back with percentages regarding their monthly card receipts just before loan (plus a predetermined rate) is repaid. Happen to be legal limits to the rates, and they will cannot be changed retroactively. The benefit to cash advances is immediate cash- it is the fastest method for obtaining cash without gonna be a loan shark.
This financing method ideal for trucking companies who need immediate cash for the short amount of this time and have limited financing options. Cost of is usually 20% if not more.
Lease-Back
A trucking company may wish to sell property, plant, and/or equipment, and simultaneously leases it back for cash.
It ideal for for trucking companies with valuable plant or equipment assets that are underutilized, along with the cost is monthly lease payments not to mention the depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, however it is almost them to find funding solutions that meet their individual needs. Being informed on all the options is customers step toward finding a suitable cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444