Though often overlooked, the trucking industry is truly essential 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 from 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 ‘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 definitely a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside backing. The following are some methods trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to the process by which businesses sell their accounts receivables to a factoring company. Approval for factoring primarily based on the creditworthiness of the trucking company’s customers.
At the use of the sale, the client gets 80-90% of this cash back immediately from the bills. The remainder of the balance comes after customer repayment, less a percentage fee that typically ranges from 1-5%.
This choices are best for B2B businesses that cannot manage to wait for payment, and the cost is 4-5% monthly with annual rate typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are most of the cheapest associated with financing. Mortgage process involves an application and overview of the company’s creditworthiness and financial track record. Small companies especially can be rejected for loans, although exceptions do be.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s savings. This form of funding is best for trucking outfits with a great credit record and don’t need the money immediately.
Cash-Advances
Cash advances take place when business receives an advance sum from your local neighborhood lender. The corporate pays financial institution back with percentages associated with their monthly card receipts until the loan (plus a predetermined rate) is repaid. There are a bunch legal limits to the rates, and also cannot be changed retroactively. The advantage of cash advances is immediate cash- can be the fastest method for obtaining cash without likely to a loan shark.
This financing method is better for trucking companies who need immediate cash for any amount of one’s time and have limited financing options. The cost is usually 20% or more.
Lease-Back
A trucking company could sell property, plant, and/or equipment, and simultaneously leases it back for cash money.
It is better for trucking companies with valuable plant or equipment assets which usually underutilized, and also the cost is monthly lease payments in addition to depreciation and tax burdens of resources.
Choices, Choices
Every trucking company is unique, however it is close to them to find funding solutions that meet their individual needs. Being informed on all your options is the first step toward finding a sufficient cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444