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 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 problem. But for small to mid-size companies operating on a strong budget, it might stop being an option. Expenses with regard to example payroll and gas come in the time between payment, and not paying your drivers is never a good business put into practice. Add to that rising fuel costs, delays due to traffic congestion, driver shortages and new regulations, and is definitely a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside funding. The following are some options for 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 duration of the sale, the client gets 80-90% of this 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 choices best for B2B firms that cannot manage to wait for payment, and also the cost is usually 4-5% monthly with an effective annual fee typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are usually the cheapest type of financing. The loan process involves an application and review of the company’s creditworthiness and financial reports. Small companies especially will usually be rejected for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s savings. This form of funding is better for trucking outfits by using a great credit file and do not require the money immediately.
Cash-Advances
Cash advances take place when an organization receives a loan sum from your local neighborhood lender. The company pays financial institution back with percentages of that monthly card receipts until the loan (plus a predetermined rate) is repaid. There are legal limits to the rates, and also cannot be changed retroactively. The help cash advances is immediate cash- occasion the fastest method for obtaining cash without in order to be a loan shark.
This financing method very best for trucking companies who need immediate cash for a short amount of this time and have limited financing options. Costly is usually 20% or more.
Lease-Back
A trucking company could sell property, plant, and/or equipment, and simultaneously leases it back for resources.
It is better for trucking companies with valuable plant or equipment assets which usually underutilized, and also the cost is monthly lease payments additionally, the depreciation and tax burdens of tools.
Choices, Choices
Every trucking company is unique, however it is up to them to locate funding solutions that meet their individual needs. Being informed on all the options is one step toward finding a sufficient cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444