Though often overlooked, the trucking industry is truly essential 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 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 a controversy. But for small to mid-size companies operating on a strict budget, it might not be an option. Expenses since payroll and gas add up in the time between payment, and not paying your drivers is never a good business approach. 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 turn to outside a mortgage. The following are some strategies to trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to might 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, customer gets 80-90% of the cash back immediately from the receipts. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This option is best for B2B firms that cannot afford to wait for payment, along with the cost usually 4-5% monthly with a healthy annual price typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are an cheapest way of financing. The borrowed funds process involves an application and review of the company’s creditworthiness and financial story. Small companies especially will usually be rejected for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s banking. This form of funding is better for trucking outfits along with a great credit record and don’t require the money immediately.
Cash-Advances
Cash advances take place when an organization receives a loan sum during a lender. The company pays financial institution back with percentages regarding their monthly card receipts before the loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, and they will cannot be changed retroactively. The help cash advances is immediate cash- it is the fastest method for obtaining cash without in order to be a loan shark.
This financing method is better for trucking companies who require immediate cash for any amount of this time and have limited financing options. The cost is usually 20% or more.
Lease-Back
A trucking company may want 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 which have been underutilized, and also the cost is monthly lease payments in addition to depreciation and tax burdens of gadget.
Choices, Choices
Every trucking company is unique, that’s why it is nearly them to find funding solutions that meet their individual needs. Being informed on all your options is customers step toward finding the right cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
Posted on:
September 18, 2019