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 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 good budget, it might stop being an option. Expenses with regard to example payroll and gas sum up 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 this is a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside funding. The following are some methods 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 time period of the sale, the client gets 80-90% belonging to the cash back immediately from the bills. The remainder of the balance comes after customer repayment, less a portion fee that typically ranges from 1-5%.
This choices best for B2B firms that cannot manage to wait for payment, as well as the cost is 4-5% monthly with an effective annual fee typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are usually the cheapest associated with financing. Mortgage process involves an application and athleanx workout review the company’s creditworthiness and financial profile. Small companies especially can be refused for loans, although exceptions do live.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s banking. This form of funding ideal for for trucking outfits along with a great credit record and have no need for the money immediately.
Cash-Advances
Cash advances take place when a small-business receives an advance sum during a lender. They pays the lending company back with percentages associated with their monthly card receipts before the loan (plus a predetermined rate) is repaid. There are legal limits to the rates, and they will cannot be changed retroactively. The profit to cash advances is immediate cash- the time the fastest method for obtaining cash without in order to a loan shark.
This financing method is the for trucking companies who require immediate cash for the short amount associated with your and have limited financing options. Cost of is usually 20% and up.
Lease-Back
A trucking company may wish to sell property, plant, and/or equipment, and simultaneously leases it back for cash money.
It is best for trucking companies with valuable plant or equipment assets which usually underutilized, along with the cost is monthly lease payments in addition to depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, that’s why it is close to them to search out funding solutions that meet their individual needs. Being informed on all the options is initial 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