Though often overlooked, the trucking industry is really 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 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 such as payroll and gas come 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 show to outside financing. The following are some strategies to 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 draws on on the creditworthiness of the trucking company’s customers.
At the use of the sale, customer gets 80-90% of your cash back immediately from the statements. 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 manage to wait for payment, along with the cost usually 4-5% monthly with an effective annual rate typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are usually the cheapest involving financing. The loan process involves an application and analysis of the company’s creditworthiness and financial track record. Small companies especially can 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 better for trucking outfits using a great credit report . and don’t want the money immediately.
Cash-Advances
Cash advances take place when a small business receives a loan sum from your local neighborhood lender. Business pays the lender back with percentages of that monthly card receipts just before loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and so they also cannot be changed retroactively. The profit to cash advances is immediate cash- can be the fastest method for obtaining cash without in order to be a loan shark.
This financing method is the for trucking companies who require immediate cash for a short amount of one’s time and have limited financing options. Cost of is usually 20% or even more.
Lease-Back
A trucking company might want to sell property, plant, and/or equipment, and simultaneously leases it back for moola.
It very best for trucking companies with valuable plant or equipment assets which might be underutilized, and also the cost is monthly lease payments additionally, the depreciation and tax burdens of machines.
Choices, Choices
Every trucking company is unique, and it is well over them to find funding solutions that meet their individual needs. Being informed on all the choices is customers step toward finding the right cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
Posted on:
September 18, 2019