Though often overlooked, the trucking industry is critical 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 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 problem. But for small to mid-size companies operating on a decent budget, it might ‘t be an option. Expenses regarding payroll and gas sum 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 flip to outside a mortgage. The following are some strategies 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 centered on the creditworthiness of the trucking company’s customers.
At the time period of the sale, customer gets 80-90% of your cash back immediately from the invoices. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This options best for B2B companies 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 overview of the company’s creditworthiness and financial story. Small companies especially are more likely to be thrown to the wolves for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s financial institution. This form of funding is best for trucking outfits having a great credit record and don’t require the money immediately.
Cash-Advances
Cash advances take place when an organization receives an advance sum from your local neighborhood lender. They pays the lender back with percentages regarding their monthly card receipts until the loan (plus a predetermined rate) is repaid. There are a bunch legal limits to the rates, and they cannot be changed retroactively. The profit to cash advances is immediate cash- the time the fastest method for obtaining cash without in order to a loan shark.
This financing method is best for trucking companies who need immediate cash for the short amount of time and have limited financing options. Will not find is usually 20% or even more.
Lease-Back
A trucking company may want to sell property, plant, and/or equipment, and simultaneously leases it back for earnings.
It is best for trucking companies with valuable plant or equipment assets that are underutilized, as well as the cost is monthly lease payments plus the depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, and in addition it is well over them to find funding solutions that meet their individual needs. Being informed on all options is the first step toward finding the right cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444