Though often overlooked, the trucking industry is critical 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 huge concern. But for small to mid-size companies operating on a tight budget, it might ‘t 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 put into practice. 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 a mortgage. The following are some strategies to trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to difficult . 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, customer gets 80-90% of this 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 are best for B2B companies that cannot manage to wait for payment, and also the cost is often 4-5% monthly with an effective annual interest rate typically between 18-30%.
Bank Loans
Though tough to come by, bank loans are these cheapest way of financing. Mortgage loan process involves an application and overview of the company’s creditworthiness and financial reports. Small companies especially are more likely to be turned down for loans, although exceptions do live.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s financial institution. This form of funding greatest for for trucking outfits along with a great credit ratings and do not require the money immediately.
Cash-Advances
Cash advances take place when business receives an advance sum from our lender. The corporate pays financial institution back with percentages of that monthly card receipts until the loan (plus a predetermined rate) is repaid. There are legal limits to the rates, and they cannot be changed retroactively. The advantage of cash advances is immediate cash- the time the fastest method for obtaining cash without in order to a loan shark.
This financing method very best for trucking companies who require immediate cash for a much smaller amount of this time and have limited financing options. The cost 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.
It is better for trucking companies with valuable plant or equipment assets usually are underutilized, as well as the cost is monthly lease payments additionally, the depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, and it is almost them to find funding solutions that meet their individual needs. Being informed on all the options is customers 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