Though often overlooked, the trucking industry is essential 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 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 decent budget, it might stop an option. Expenses such as 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 actually not a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside borrowing. The following are some strategies for 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 primarily 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 debts. The remainder of the balance comes after customer repayment, less a percentage fee that typically ranges from 1-5%.
This option is best for B2B firms that cannot afford to wait for payment, along with the cost is often 4-5% monthly with an effective annual rate typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are usually the cheapest type of financing. The borrowed funds process involves an application and analysis of the company’s creditworthiness and financial reports. Small companies especially are more likely to be thrown to the wolves for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s banking. This form of funding is better for trucking outfits with a great credit file and have no need for the money immediately.
Cash-Advances
Cash advances take place when a small-business receives a loan sum from your local neighborhood lender. They pays financial institution back with percentages regarding their monthly card receipts just before loan (plus a predetermined rate) is repaid. There are legal limits to the rates, and they cannot be changed retroactively. The benefit to cash advances is immediate cash- is certainly the fastest method for obtaining cash without in order to a loan shark.
This financing method very best for trucking companies who need immediate cash for the short amount of one’s time 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 cash money.
It is better for trucking companies with valuable plant or equipment assets which might be underutilized, along with the cost is monthly lease payments as well as the depreciation and tax burdens of gadget.
Choices, Choices
Every trucking company is unique, however it is almost them to search out funding solutions that meet their individual needs. Being informed on all the options is begin 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