Though often overlooked, the trucking industry is vitally important to the health within 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 the 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 decent budget, it might ‘t be an option. Expenses since payroll and gas calculate 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 turn to outside financing. The following are some strategies for 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 draws on on the creditworthiness of the trucking company’s customers.
At the time of the sale, the client gets 80-90% belonging to the cash back immediately from the statements. The remainder of the balance comes after customer repayment, less a percentage fee that typically ranges from 1-5%.
This choice is best for B2B firms that cannot afford to wait for payment, as well as the cost is frequently 4-5% monthly with an impressive annual interest rate typically between 18-30%.
Bank Loans
Though difficult to come by, bank loans are often the cheapest type of financing. The borrowed funds process involves an application and analysis of the company’s creditworthiness and financial history. Small companies especially possess a be rejected for loans, although exceptions do live.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s banking. This form of funding is better for trucking outfits with a great credit history and do not require the money immediately.
Cash-Advances
Cash advances take place when an organization receives funding sum from a lender. Business pays financial institution 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 they will cannot be changed retroactively. The benefits of cash advances is immediate cash- is certainly the fastest method for obtaining cash without in order to be a loan shark.
This financing method is better for trucking companies who need immediate cash for the short amount associated with your and have limited financing options. The cost is usually 20% or even more.
Lease-Back
A trucking company may choose to sell property, plant, and/or equipment, and simultaneously leases it back for moola.
It is best 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 gadget.
Choices, Choices
Every trucking company is unique, and it is well over them to find funding solutions that meet their individual needs. Being informed on all your options is begin step toward finding a fitting cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
Posted on:
September 18, 2019