Though often overlooked, the trucking industry is critical 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 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 strong budget, it might not be an option. Expenses like payroll and gas provide in the time between payment, and not paying your drivers is never a good business approach. 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 backing. The following are some choices 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 is based on the creditworthiness of the trucking company’s customers.
At the use of the sale, customer gets 80-90% of this cash back immediately from the invoices. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This options best for B2B firms that cannot afford to wait for payment, and also the cost is 4-5% monthly with an effective annual fee typically between 18-30%.
Bank Loans
Though in order to come by, bank loans are these cheapest form of financing. The borrowed funds process involves an application and review of the company’s creditworthiness and financial profile. Small companies especially can be thrown to the wolves for loans, although exceptions do live.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s bank account. This form of funding greatest for for trucking outfits by using a great credit history and have no need for the money immediately.
Cash-Advances
Cash advances take place when a company receives a loan sum from a lender. The company pays the lending company back with percentages of that 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 advantage 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 ideal for trucking companies who need immediate cash for the short amount of time and have limited financing options. The cost 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.
It ideal for trucking companies with valuable plant or equipment assets which might be underutilized, as well as the cost is monthly lease payments as well as the depreciation and tax burdens of tools.
Choices, Choices
Every trucking company is unique, that’s why it is up to them to find funding solutions that meet their individual needs. Being informed on all the choices is begin step toward finding the right cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444