Though often overlooked, the trucking industry is essential to the health for 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 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 not be an option. Expenses such as 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 a recipe for financial hardship.
Therefore, trucking companies often have to show to outside funding. The following are some methods 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 use of the sale, customer gets 80-90% for 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 are best for B2B firms that cannot afford to wait for payment, and also the cost is 4-5% monthly with a healthy annual interest rate typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are most of the cheapest type of financing. Mortgage loan process involves an application and overview of the company’s creditworthiness and financial story. Small companies especially are more likely to be denied for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s banking. This form of funding is better for trucking outfits using a great credit record and don’t want the money immediately.
Cash-Advances
Cash advances take place when a small-business receives funding sum from your local neighborhood lender. Business pays loan provider back with percentages from their monthly card receipts until the loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and so they also cannot be changed retroactively. The benefit to cash advances is immediate cash- can be the fastest method for obtaining cash without in order to a loan shark.
This financing method very best for trucking companies who require immediate cash for any amount your own time and have limited financing options. Cost of is usually 20% and up.
Lease-Back
A trucking company may choose to sell property, plant, and/or equipment, and simultaneously leases it back for resources.
It is best for trucking companies with valuable plant or equipment assets which have been underutilized, and also the cost is monthly lease payments as well as the depreciation and tax burdens of tools.
Choices, Choices
Every trucking company is unique, and it is up to them to locate funding solutions that meet their individual needs. Being informed on all the 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