Though often overlooked, the trucking industry is vitally important 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 problems. But for small to mid-size companies operating on a good budget, it might halt an option. Expenses with regard to example 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 it is a recipe for financial hardship.
Therefore, trucking companies often have to show to outside borrowing. 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 draws on on the creditworthiness of the trucking company’s customers.
At the amount of the sale, customer gets 80-90% of your 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 best for B2B companies that cannot manage to wait for payment, and the cost is often 4-5% monthly with an impressive annual interest rate typically between 18-30%.
Bank Loans
Though difficult to come by, bank loans are most of the cheapest form of financing. Mortgage loan process involves an application and review of the company’s creditworthiness and financial story. Small companies especially will usually be rejected for loans, although exceptions do be around.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s savings. This form of funding ideal for for trucking outfits with a great credit file and don’t need the money immediately.
Cash-Advances
Cash advances take place when a small business receives a loan sum from your local neighborhood lender. Business pays the lending company back with percentages regarding their monthly card receipts up to the loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and also cannot be changed retroactively. The benefit to cash advances is immediate cash- the time the fastest method for obtaining cash without gonna be a loan shark.
This financing method is the for trucking companies who need immediate cash for the short amount of this time and have limited financing options. Cost of is usually 20% if not more.
Lease-Back
A trucking company may wish to sell property, plant, and/or equipment, and simultaneously leases it back for cash.
It is best for trucking companies with valuable plant or equipment assets that are underutilized, and the cost is monthly lease payments not to mention the depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, and it is almost them to find funding solutions that meet their individual needs. Being informed on all possibilities is customers step toward finding a suitable cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
Posted on:
September 18, 2019