Though often overlooked, the trucking industry is really important 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 in 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 decent budget, it might halt an option. Expenses since payroll and gas calculate 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 this is a recipe for financial hardship.
Therefore, trucking companies often have to show to outside a mortgage. The following are some strategies 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 draws 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 invoices. The remainder of the balance comes after customer repayment, less a percentage fee that typically ranges from 1-5%.
This choice is best for B2B firms that cannot afford to wait for payment, and the cost is frequently 4-5% monthly with an impressive annual rate typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are often the cheapest associated with financing. The loan process involves an application and analysis of the company’s creditworthiness and financial story. Small companies especially can be thrown to the wolves 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 is best for trucking outfits having a great credit record and have no need for the money immediately.
Cash-Advances
Cash advances take place when a small business receives a loan sum from our lender. The organization pays the lender back with percentages of their monthly card receipts prior to loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and they will cannot be changed retroactively. The help cash advances is immediate cash- can be the fastest method for obtaining cash without in order to a loan shark.
This financing method very best for trucking companies who need immediate cash for regarding amount your own time 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 is better for trucking companies with valuable plant or equipment assets which have been underutilized, and the cost is monthly lease payments additionally, the depreciation and tax burdens of tools.
Choices, Choices
Every trucking company is unique, and it is almost them to find funding solutions that meet their individual needs. Being informed on all the choices is one step toward finding a fitting cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
Posted on:
September 18, 2019