Though often overlooked, the trucking industry is vitally important 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 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 chore. But for small to mid-size companies operating on a good budget, it might stop being an option. Expenses like payroll and gas come in the time between payment, and not paying your drivers is never a good business put into practice. Add to that rising fuel costs, delays due to traffic congestion, driver shortages and new regulations, and this is a recipe for financial hardship.
Therefore, trucking companies often have flip to outside funding. The following are some methods trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to the process by which businesses sell their accounts receivables to a factoring company. Approval for factoring primarily based on the creditworthiness of the trucking company’s customers.
At the time of the sale, customer gets 80-90% for this cash back immediately from the invoices. The remainder of the balance comes after customer repayment, less a portion fee that typically ranges from 1-5%.
This choices are best for B2B companies that cannot manage to wait for payment, and the cost usually 4-5% monthly with annual price typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are usually the cheapest form of financing. The loan process involves an application and analysis of the company’s creditworthiness and financial history. Small companies especially are more likely to be thrown to the wolves for loans, although exceptions do be around.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s savings. This form of funding ideal for for trucking outfits having a great credit record and don’t want the money immediately.
Cash-Advances
Cash advances take place when an organization receives a loan sum from our lender. The organization pays the lending company back with percentages associated with their monthly card receipts up to the loan (plus a predetermined rate) is repaid. Happen to be legal limits to the rates, and so they also cannot be changed retroactively. The benefit to cash advances is immediate cash- is certainly the fastest method for obtaining cash without likely to a loan shark.
This financing method is best for trucking companies who require immediate cash for regarding amount of time and have limited financing options. The cost is usually 20% if not more.
Lease-Back
A trucking company could 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, and the cost is monthly lease payments additionally, the depreciation and tax burdens of machines.
Choices, Choices
Every trucking company is unique, however it is close to them inside your funding solutions that meet their individual needs. Being informed on all your 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