Though often overlooked, the trucking industry is critical to the health belonging to 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 problems. But for small to mid-size companies operating on a strong budget, it might stop being an option. Expenses since 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 financing. The following are some choices trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to difficult . by which businesses sell their accounts receivables to a factoring company. Approval for factoring is based on the creditworthiness of the trucking company’s customers.
At the time of the sale, the client gets 80-90% of this cash back immediately from the receipts. The remainder of the balance comes after customer repayment, less a portion 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 frequently 4-5% monthly with annual price typically between 18-30%.
Bank Loans
Though difficult to come by, bank loans are most of the cheapest associated with financing. The borrowed funds process involves an application and analysis of the company’s creditworthiness and financial story. Small companies especially can be turned down for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s bank account. This form of funding is the for trucking outfits by using a great credit file 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. The corporate pays financial institution back with percentages of that monthly card receipts before the loan (plus a predetermined rate) is repaid. There are legal limits to the rates, and they will cannot be changed retroactively. The benefit 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 a much smaller amount of time and have limited financing options. Cost of is usually 20% and up.
Lease-Back
A trucking company might want to sell property, plant, and/or equipment, and simultaneously leases it back for resources.
It very best for trucking companies with valuable plant or equipment assets usually 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, however it is up to them to search out funding solutions that meet their individual needs. Being informed on all possibilities 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
Posted on:
September 18, 2019