Though often overlooked, the trucking industry is vitally 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 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 decent budget, it might ‘t be an option. Expenses like payroll and gas come 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 is a recipe for financial hardship.
Therefore, trucking companies often have flip to outside backing. 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 centered on the creditworthiness of the trucking company’s customers.
At the amount of the sale, customer gets 80-90% belonging to the cash back immediately from the receipts. The remainder of the balance comes after customer repayment, less a portion fee that typically ranges from 1-5%.
This choices best for B2B firms that cannot afford to wait for payment, and also the cost is 4-5% monthly with a healthy annual pace typically between 18-30%.
Bank Loans
Though difficult to come by, bank loans are usually the cheapest way of financing. The loan process involves an application and breakdown of the company’s creditworthiness and financial reports. Small companies especially tend to be thrown to the wolves for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s life’s savings. This form of funding greatest for for trucking outfits using a great credit record and do not require the money immediately.
Cash-Advances
Cash advances take place when business receives a loan sum from our lender. The organization pays loan provider back with percentages of that monthly card receipts just before loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, and they cannot be changed retroactively. The benefits of cash advances is immediate cash- the time the fastest method for obtaining cash without likely to a loan shark.
This financing method is best for trucking companies who need immediate cash for any amount your own time and have limited financing options. Costly is usually 20% or more.
Lease-Back
A trucking company might want to sell property, plant, and/or equipment, and simultaneously leases it back for moola.
It ideal for trucking companies with valuable plant or equipment assets usually are underutilized, along with 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 well over them inside your 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