Though often overlooked, the trucking industry is critical to the health within 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 strict budget, it might halt an option. Expenses like payroll and gas sum up in the time between payment, and not paying your drivers is never a good business rehearsal. 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 funding. 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 duration of the sale, customer gets 80-90% of the cash back immediately from the debts. 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, as well as the cost is 4-5% monthly with annual rate typically between 18-30%.
Bank Loans
Though tough to come by, bank loans are usually the cheapest associated with financing. The loan process involves an application and breakdown of the company’s creditworthiness and financial history. Small companies especially tend to be turned down for loans, although exceptions do be.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s financial institution. This form of funding is best for trucking outfits with a great credit ratings and don’t require the money immediately.
Cash-Advances
Cash advances take place when a small business receives funding sum from your local neighborhood lender. The organization pays the lending company back with percentages regarding their monthly card receipts just before loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, which 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 very best for trucking companies who require immediate cash for any amount of one’s time and have limited financing options. The cost is usually 20% if not 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, as well as the cost is monthly lease payments plus the depreciation and tax burdens of resources.
Choices, Choices
Every trucking company is unique, however it is up to them to discover funding solutions that meet their individual needs. Being informed on all your options is the first step toward finding a worthwhile cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444