Though often overlooked, the trucking industry is essential 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 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 problem. But for small to mid-size companies operating on a strong 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 rehearsal. Add to that rising fuel costs, delays due to traffic congestion, driver shortages and new regulations, and it is a recipe for financial hardship.
Therefore, trucking companies often have to show to outside a mortgage. The following are some options for 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 centered on the creditworthiness of the trucking company’s customers.
At the amount of the sale, customer gets 80-90% belonging to the cash back immediately from the invoices. 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 companies that cannot afford to wait for payment, and the cost usually 4-5% monthly with a healthy annual interest rate typically between 18-30%.
Bank Loans
Though in order to come by, bank loans are these cheapest associated with financing. The loan process involves an application and review of the company’s creditworthiness and financial story. Small companies especially tend to be rejected for loans, although exceptions do live.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s financial institution. This form of funding greatest for for trucking outfits using a great credit ratings and do not require the money immediately.
Cash-Advances
Cash advances take place when an organization receives an advance sum from our lender. They pays loan provider back with percentages of their monthly card receipts up to the loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, which cannot be changed retroactively. The profit to cash advances is immediate cash- can be 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 the short amount your own time and have limited financing options. Will not find is usually 20% or even more.
Lease-Back
A trucking company might want to sell property, plant, and/or equipment, and simultaneously leases it back for cash.
It ideal for trucking companies with valuable plant or equipment assets that are underutilized, and the cost is monthly lease payments plus the depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, and in addition it is up to them to search out funding solutions that meet their individual needs. Being informed on all options is customers step toward finding a suitable cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
Posted on:
September 18, 2019