Though often overlooked, the trucking industry is essential 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 within 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 problems. But for small to mid-size companies operating on a good budget, it might stop being an option. Expenses such as payroll and gas sum 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 show to outside financing. The following are some choices 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 centered on the creditworthiness of the trucking company’s customers.
At the time period of the sale, customer gets 80-90% of your cash back immediately from the debts. The remainder of the balance comes after customer repayment, less a portion fee that typically ranges from 1-5%.
This option is best for B2B businesses that cannot afford to wait for payment, as well as the cost is 4-5% monthly with a powerful annual price typically between 18-30%.
Bank Loans
Though in order to come by, bank loans are these cheapest form of financing. The loan process involves an application and overview of the company’s creditworthiness and financial track record. Small companies especially possess a be refused for loans, although exceptions do live.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s bank account. This form of funding is best for trucking outfits having a great credit file and don’t require the money immediately.
Cash-Advances
Cash advances take place when a company receives funding sum from your local neighborhood lender. Business pays the lender back with percentages regarding their monthly card receipts before the loan (plus a predetermined rate) is repaid. There are a bunch legal limits to the rates, and they will cannot be changed retroactively. The advantage of 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 best for trucking companies who need immediate cash for regarding amount your own time and have limited financing options. Cost of is usually 20% or more.
Lease-Back
A trucking company may choose to sell property, plant, and/or equipment, and simultaneously leases it back for cash money.
It is best for trucking companies with valuable plant or equipment assets that are underutilized, and the cost is monthly lease payments plus the depreciation and tax burdens of tools.
Choices, Choices
Every trucking company is unique, and it is well over them to locate funding solutions that meet their individual needs. Being informed on all options is the first 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