Though often overlooked, the trucking industry is essential 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 a huge concern. But for small to mid-size companies operating on a decent budget, it might stop being an option. Expenses regarding payroll and gas sum up 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 definitely a recipe for financial hardship.
Therefore, trucking companies often have to show to outside funding. The following are some options for 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 centered on the creditworthiness of the trucking company’s customers.
At the use of the sale, customer gets 80-90% of the cash back immediately from the debts. The remainder of the balance comes after customer repayment, less a portion fee that typically ranges from 1-5%.
This option is best for B2B businesses that cannot afford to wait for payment, along with the cost is 4-5% monthly with an effective annual price typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are usually the cheapest form of financing. The borrowed funds process involves an application and overview of the company’s creditworthiness and financial history. Small companies especially can be refused for loans, although exceptions do be.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s savings. This form of funding greatest for for trucking outfits by using a great credit ratings and do not require the money immediately.
Cash-Advances
Cash advances take place when business receives a loan sum from a lender. The corporate pays the lender back with percentages regarding their monthly card receipts before the loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, and also cannot be changed retroactively. The benefit to cash advances is immediate cash- it is the fastest method for obtaining cash without going to a loan shark.
This financing method is best for trucking companies who need immediate cash for regarding amount of this time and have limited financing options. Cost of is usually 20% or more.
Lease-Back
A trucking company could sell property, plant, and/or equipment, and simultaneously leases it back for moola.
It very 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 tools.
Choices, Choices
Every trucking company is unique, and it is almost them inside your funding solutions that meet their individual needs. Being informed on all options is one step toward finding a fitting cash flow solution.
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4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
Posted on:
September 18, 2019