Though often overlooked, the trucking industry is truly 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 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 problem. But for small to mid-size companies operating on a tight budget, it might not be an option. Expenses such as payroll and gas come in the time between payment, and not paying your drivers is never a good business rehearsal. 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 flip to outside a mortgage. 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 is based on the creditworthiness of the trucking company’s customers.
At the time of the sale, customer gets 80-90% of this cash back immediately from the statements. 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, along with the cost is 4-5% monthly with an effective annual fee typically between 18-30%.
Bank Loans
Though tough to come by, bank loans are these cheapest form of financing. The borrowed funds process involves an application and athleanx workout review the company’s creditworthiness and financial history. Small companies especially are more likely to be refused for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s bank account. This form of funding greatest for for trucking outfits using a great credit file and have no need for the money immediately.
Cash-Advances
Cash advances take place when a company receives an advance sum from your local neighborhood lender. They pays loan provider back with percentages of their monthly card receipts before the loan (plus a predetermined rate) is repaid. Happen to be legal limits to the rates, and also cannot be changed retroactively. The profit to cash advances is immediate cash- the time the fastest method for obtaining cash without in order to be a loan shark.
This financing method ideal for trucking companies who need immediate cash for a much smaller amount of time and have limited financing options. Cost of is usually 20% or more.
Lease-Back
A trucking company might want 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 which usually underutilized, and also the cost is monthly lease payments as well as the depreciation and tax burdens of gadget.
Choices, Choices
Every trucking company is unique, and in addition it is almost them inside your funding solutions that meet their individual needs. Being informed on all the choices is one 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