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 strong budget, it might stop being an option. Expenses regarding payroll and gas calculate 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 it is a recipe for financial hardship.
Therefore, trucking companies often have to show to outside backing. The following are some options for trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to difficult . by which businesses sell their accounts receivables to a factoring company. Approval for factoring is based on the creditworthiness of the trucking company’s customers.
At the duration of the sale, customer gets 80-90% for this cash back immediately from the statements. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This choices best for B2B businesses that cannot manage to wait for payment, and the cost usually 4-5% monthly with an effective annual pace typically between 18-30%.
Bank Loans
Though in order to come by, bank loans are an cheapest type of financing. The borrowed funds process involves an application and breakdown of the company’s creditworthiness and financial history. Small companies especially tend to be refused for loans, although exceptions do be.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s banking. This form of funding is the for trucking outfits along with a great credit history and don’t need the money immediately.
Cash-Advances
Cash advances take place when an organization receives a loan sum from our lender. The company pays the lending company back with percentages regarding their monthly card receipts before the 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- the time the fastest method for obtaining cash without likely to a loan shark.
This financing method is better for trucking companies who need immediate cash for the short amount associated with your and have limited financing options. Costly is usually 20% and up.
Lease-Back
A trucking company could sell property, plant, and/or equipment, and simultaneously leases it back for cash.
It ideal for trucking companies with valuable plant or equipment assets that are underutilized, and also the cost is monthly lease payments plus the depreciation and tax burdens of gadget.
Choices, Choices
Every trucking company is unique, however it is up to them to locate funding solutions that meet their individual needs. Being informed on all the options is initial step toward finding a sufficient cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
Posted on:
September 18, 2019