Though often overlooked, the trucking industry is vitally important 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 from 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 problems. But for small to mid-size companies operating on a tight budget, it might ‘t be an option. Expenses regarding payroll and gas calculate in the time between payment, and not paying your drivers is never a good business approach. Add to that rising fuel costs, delays due to traffic congestion, driver shortages and new regulations, and it is a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside borrowing. The following are some options for 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 use of the sale, customer gets 80-90% of the cash back immediately from the bills. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This choices are best for B2B companies that cannot manage to wait for payment, along with the cost is usually 4-5% monthly with a powerful annual fee typically between 18-30%.
Bank Loans
Though difficult to come by, bank loans are most of the cheapest type of financing. The borrowed funds process involves an application and analysis of the company’s creditworthiness and financial track record. Small companies especially possess a 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 best for trucking outfits by using a great credit file and don’t require the money immediately.
Cash-Advances
Cash advances take place when an organization receives an advance sum from a lender. The company pays the lender back with percentages of their monthly card receipts prior to loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, which cannot be changed retroactively. The help cash advances is immediate cash- the time the fastest method for obtaining cash without likely to a loan shark.
This financing method very best for trucking companies who need immediate cash for a short amount your own time and have limited financing options. Zox pro training system is usually 20% or even more.
Lease-Back
A trucking company might want to sell property, plant, and/or equipment, and simultaneously leases it back for resources.
It is best for trucking companies with valuable plant or equipment assets usually are underutilized, along with the cost is monthly lease payments plus the depreciation and tax burdens of machines.
Choices, Choices
Every trucking company is unique, however it is almost them to find funding solutions that meet their individual needs. Being informed on all the options is one step toward finding the right cash flow solution.
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