Though often overlooked, the trucking industry is essential to the health for 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 controversy. But for small to mid-size companies operating on a good budget, it might not be an option. Expenses with regard to example payroll and gas add up in the time between payment, and not paying your drivers is never a good business rehearsal. 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 flip 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 draws on on the creditworthiness of the trucking company’s customers.
At the duration of the sale, customer gets 80-90% of the 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 choices best for B2B businesses that cannot manage to wait for payment, and the cost usually 4-5% monthly with a powerful annual rate typically between 18-30%.
Bank Loans
Though in order to come by, bank loans are these cheapest involving financing. Mortgage loan process involves an application and review of the company’s creditworthiness and financial story. Small companies especially are more likely to be denied for loans, although exceptions do live.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s life’s savings. This form of funding ideal for for trucking outfits by using a great credit file and have no need for the money immediately.
Cash-Advances
Cash advances take place when a company receives an advance sum from our lender. The organization pays the lending company back with percentages regarding their monthly card receipts up to the loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and so they also cannot be changed retroactively. The profit to cash advances is immediate cash- it is the fastest method for obtaining cash without in order to a loan shark.
This financing method is the for trucking companies who need immediate cash for the short amount of this time and have limited financing options. Costly is usually 20% or older.
Lease-Back
A trucking company might want to sell property, plant, and/or equipment, and simultaneously leases it back for earnings.
It is best for trucking companies with valuable plant or equipment assets which have been underutilized, and also the cost is monthly lease payments not to mention the depreciation and tax burdens of tools.
Choices, Choices
Every trucking company is unique, and in addition it is close to them inside your funding solutions that meet their individual needs. Being informed on all your options is customers 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