Though often overlooked, the trucking industry is truly 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 in the 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 chore. But for small to mid-size companies operating on a decent budget, it might stop an option. Expenses such as payroll and gas sum up in the time between payment, and not paying your drivers is never a good business put into practice. Add to that rising fuel costs, delays due to traffic congestion, driver shortages and new regulations, and this is a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside backing. The following are some methods 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 founded on on the creditworthiness of the trucking company’s customers.
At the time of the sale, the client gets 80-90% of 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 options best for B2B firms that cannot manage to wait for payment, along with the cost is 4-5% monthly with an impressive annual interest rate typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are often the cheapest type of financing. Mortgage loan process involves an application and review of the company’s creditworthiness and financial reports. Small companies especially can be rejected for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s life’s savings. This form of funding is best for trucking outfits by using a great credit file and don’t need the money immediately.
Cash-Advances
Cash advances take place when a company receives funding sum from our lender. The company pays loan provider back with percentages of that monthly card receipts until 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- the time the fastest method for obtaining cash without gonna be a loan shark.
This financing method is best for trucking companies who need immediate cash for a short amount associated with your and have limited financing options. Costly is usually 20% if not more.
Lease-Back
A trucking company may choose to sell property, plant, and/or equipment, and simultaneously leases it back for moola.
It ideal for trucking companies with valuable plant or equipment assets which usually underutilized, and also the cost is monthly lease payments not to mention the depreciation and tax burdens of gadget.
Choices, Choices
Every trucking company is unique, that’s why it is well over them to discover funding solutions that meet their individual needs. Being informed on all the options is one step toward finding a sufficient cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
Posted on:
September 18, 2019