Though often overlooked, the trucking industry is essential to the health belonging to 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 huge concern. 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 repeat. 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 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 duration of the sale, customer gets 80-90% of the cash back immediately from the statements. The remainder of the balance comes after customer repayment, less a portion fee that typically ranges from 1-5%.
This choice is best for B2B businesses that cannot manage to wait for payment, along with the cost is often 4-5% monthly with annual pace typically between 18-30%.
Bank Loans
Though hard 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 thrown to the wolves for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s banking. This form of funding is the for trucking outfits having 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 company pays the lender back with percentages regarding their monthly card receipts just before loan (plus a predetermined rate) is repaid. Happen to be 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 ideal 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 may want to sell property, plant, and/or equipment, and simultaneously leases it back for earnings.
It ideal for 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, that’s why it is close to them to locate funding solutions that meet their individual needs. Being informed on all possibilities is begin step toward finding a worthwhile cash flow solution.
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4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
Posted on:
September 18, 2019