Though often overlooked, the trucking industry is truly essential 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 within 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 decent budget, it might stop an option. Expenses regarding 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 is actually not a recipe for financial hardship.
Therefore, trucking companies often have to show to outside funding. The following are some choices trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to implies 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 duration of the sale, customer gets 80-90% for this cash back immediately from the bills. 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 companies that cannot manage to wait for payment, and the cost is frequently 4-5% monthly with annual rate typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are an cheapest type of financing. The borrowed funds process involves an application and overview of the company’s creditworthiness and financial story. Small companies especially will usually be rejected for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s savings. This form of funding is best for trucking outfits along with a great credit history and don’t want the money immediately.
Cash-Advances
Cash advances take place when a small business receives a loan sum from your local neighborhood lender. Business pays financial institution back with percentages associated with their monthly card receipts before the loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, which cannot be changed retroactively. The benefit to cash advances is immediate cash- occasion the fastest method for obtaining cash without likely to a loan shark.
This financing method ideal for trucking companies who require immediate cash for the short amount of time and have limited financing options. Will not find is usually 20% if not more.
Lease-Back
A trucking company might want to sell property, plant, and/or equipment, and simultaneously leases it back for earnings.
It very best for trucking companies with valuable plant or equipment assets that are underutilized, and also the cost is monthly lease payments in addition to depreciation and tax burdens of gadget.
Choices, Choices
Every trucking company is unique, however it is nearly them to locate funding solutions that meet their individual needs. Being informed on all the options is customers step toward finding a sufficient cash flow solution.
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4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444