Though often overlooked, the trucking industry is vitally important to the health of 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 controversy. But for small to mid-size companies operating on a strict budget, it might stop an option. Expenses since 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 a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside financing. The following are some choices trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to might 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 time of the sale, customer gets 80-90% for this cash back immediately from the receipts. The remainder of the balance comes after customer repayment, less a portion fee that typically ranges from 1-5%.
This options best for B2B businesses that cannot manage to wait for payment, along with 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 often the cheapest type of financing. The money process involves an application and analysis of the company’s creditworthiness and financial reports. Small companies especially possess a be denied for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s savings. This form of funding ideal for for trucking outfits by using a great credit record and don’t require the money immediately.
Cash-Advances
Cash advances take place when business receives an advance sum from the lender. The corporate pays the lending company back with percentages from their monthly card receipts just before loan (plus a predetermined rate) is repaid. There are a bunch legal limits to the rates, and they cannot be changed retroactively. The benefits of cash advances is immediate cash- occasion the fastest method for obtaining cash without in order to be a loan shark.
This financing method is better for trucking companies who need immediate cash for any amount of time and have limited financing options. The cost is usually 20% and up.
Lease-Back
A trucking company may want to sell property, plant, and/or equipment, and simultaneously leases it back for resources.
It very best for trucking companies with valuable plant or equipment assets which might be underutilized, along with the cost is monthly lease payments in addition to depreciation and tax burdens of gadget.
Choices, Choices
Every trucking company is unique, that’s why it is nearly them to discover funding solutions that meet their individual needs. Being informed on all the choices is begin step toward finding a fitting cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444