Though often overlooked, the trucking industry is essential to the health on 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 controversy. But for small to mid-size companies operating on a strong budget, it might halt an option. Expenses such as 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 show to outside financing. The following are some choices trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to carpet by which businesses sell their accounts receivables to a factoring company. Approval for factoring is based on the creditworthiness of the trucking company’s customers.
At the amount of the sale, the client gets 80-90% of this cash back immediately from the debts. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This options best for B2B businesses that cannot manage to wait for payment, and the cost is frequently 4-5% monthly with an effective annual pace typically between 18-30%.
Bank Loans
Though in order to come by, bank loans are these cheapest associated with financing. The borrowed funds process involves an application and analysis of the company’s creditworthiness and financial story. Small companies especially are more likely to be turned down 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 record and don’t need the money immediately.
Cash-Advances
Cash advances take place when an organization receives an advance sum from a lender. Business pays loan provider back with percentages of their monthly card receipts before the loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, and they cannot be changed retroactively. The benefits of cash advances is immediate cash- is certainly the fastest method for obtaining cash without in order to a loan shark.
This financing method is better for trucking companies who need immediate cash for regarding amount of time and have limited financing options. Costly is usually 20% or even more.
Lease-Back
A trucking company may wish to sell property, plant, and/or equipment, and simultaneously leases it back for cash money.
It ideal for for trucking companies with valuable plant or equipment assets which usually underutilized, and the cost is monthly lease payments as well as the depreciation and tax burdens of machines.
Choices, Choices
Every trucking company is unique, that’s why it is up to them to search out funding solutions that meet their individual needs. Being informed on all the options is one 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