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 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 a huge concern. But for small to mid-size companies operating on a strong budget, it might stop being an option. Expenses like payroll and gas calculate in the time between payment, and not paying your drivers is never a good business repeat. Add to that rising fuel costs, delays due to traffic congestion, driver shortages and new regulations, and this is a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside backing. The following are some strategies for trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to the process by which businesses sell their accounts receivables to a factoring company. Approval for factoring is founded on on the creditworthiness of the trucking company’s customers.
At the time period of the sale, the client gets 80-90% of the cash back immediately from the bills. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This options best for B2B companies that cannot manage to wait for payment, as well as the cost is often 4-5% monthly with a powerful annual price typically between 18-30%.
Bank Loans
Though tough to come by, bank loans are these cheapest type of financing. The loan process involves an application and breakdown of the company’s creditworthiness and financial track record. Small companies especially will usually be refused for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s savings. This form of funding ideal for for trucking outfits with a great credit report . and don’t need the money immediately.
Cash-Advances
Cash advances take place when a small business receives an advance sum from a lender. Business pays loan provider back with percentages of their monthly card receipts just before loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, which 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 ideal for trucking companies who need immediate cash for a short amount your own time and have limited financing options. Cost of is usually 20% or older.
Lease-Back
A trucking company may choose to sell property, plant, and/or equipment, and simultaneously leases it back for moola.
It is best for trucking companies with valuable plant or equipment assets which have been underutilized, as well as the cost is monthly lease payments in addition to depreciation and tax burdens of resources.
Choices, Choices
Every trucking company is unique, make use of is up to them to locate funding solutions that meet their individual needs. Being informed on all the choices is initial step toward finding a worthwhile cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
Posted on:
September 18, 2019