Though often overlooked, the trucking industry is critical 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 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 controversy. But for small to mid-size companies operating on a strong budget, it might not be an option. Expenses such as payroll and gas calculate 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 is actually not a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside a mortgage. The following are some choices trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to carpet 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 use of the sale, customer gets 80-90% for this cash back immediately from the statements. The remainder of the balance comes after customer repayment, less a portion fee that typically ranges from 1-5%.
This choices best for B2B companies that cannot afford to wait for payment, along with the cost is usually 4-5% monthly with a healthy annual interest rate typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are often the cheapest type of financing. The loan process involves an application and analysis of the company’s creditworthiness and financial track record. Small companies especially tend to be denied for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s banking. This form of funding ideal for for trucking outfits with a great credit file and don’t want the money immediately.
Cash-Advances
Cash advances take place when a company receives a loan sum from our lender. They pays financial institution back with percentages of their monthly card receipts prior to loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and they will 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 is better for trucking companies who require immediate cash for a short amount of one’s time and have limited financing options. Costly is usually 20% or older.
Lease-Back
A trucking company may choose to sell property, plant, and/or equipment, and simultaneously leases it back for earnings.
It is better for trucking companies with valuable plant or equipment assets usually are underutilized, along with the cost is monthly lease payments as well as the depreciation and tax burdens of machines.
Choices, Choices
Every trucking company is unique, make use of is up to them to find funding solutions that meet their individual needs. Being informed on all the choices is one step toward finding a worthwhile cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444