Though often overlooked, the trucking industry is really 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 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 strong budget, it might halt 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 practice. 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 flip to outside funding. The following are some methods trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to implies 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, the client gets 80-90% of the cash back immediately from the invoices. 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 afford to wait for payment, as well as the cost is often 4-5% monthly with a powerful annual fee typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are often the cheapest involving financing. The loan process involves an application and athleanx workout review the company’s creditworthiness and financial profile. Small companies especially possess a be thrown to the wolves for loans, although exceptions do exist.
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 having a great credit ratings and do not require the money immediately.
Cash-Advances
Cash advances take place when an organization receives a loan sum from our lender. The company pays financial institution back with percentages from their monthly card receipts just before loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, and they cannot be changed retroactively. The benefit to cash advances is immediate cash- occasion the fastest method for obtaining cash without likely to a loan shark.
This financing method is better for trucking companies who need immediate cash for a much smaller amount your own time and have limited financing options. Will not find is usually 20% or older.
Lease-Back
A trucking company may wish 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 which might be underutilized, and also the cost is monthly lease payments plus the depreciation and tax burdens of gadget.
Choices, Choices
Every trucking company is unique, and in addition it is up to them to find funding solutions that meet their individual needs. Being informed on all options is the first step toward finding a fitting cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
Posted on:
September 18, 2019