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 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 a huge concern. But for small to mid-size companies operating on a strong budget, it might not be an option. Expenses since payroll and gas come 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 is definitely a recipe for financial hardship.
Therefore, trucking companies often have flip to outside borrowing. The following are some choices 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 use of the sale, the client gets 80-90% for this cash back immediately from the receipts. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This options best for B2B firms that cannot afford to wait for payment, along with the cost usually 4-5% monthly with a healthy annual price typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are most of the cheapest form of financing. Mortgage process involves an application and breakdown of the company’s creditworthiness and financial reports. Small companies especially are more likely to be turned down for loans, although exceptions do be.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s financial institution. This form of funding is the for trucking outfits having a great credit file and don’t require the money immediately.
Cash-Advances
Cash advances take place when a small business receives an advance sum from your local neighborhood lender. The organization pays financial institution back with percentages of their monthly card receipts just before loan (plus a predetermined rate) is repaid. Happen to be legal limits to the rates, and they will cannot be changed retroactively. The help cash advances is immediate cash- the time the fastest method for obtaining cash without gonna be a loan shark.
This financing method is best for trucking companies who require immediate cash for a much smaller amount of one’s time and have limited financing options. Cost of is usually 20% if not more.
Lease-Back
A trucking company might want to sell property, plant, and/or equipment, and simultaneously leases it back for moola.
It very best for trucking companies with valuable plant or equipment assets which usually underutilized, as well as the cost is monthly lease payments in addition to depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, that’s why it is up to them inside your funding solutions that meet their individual needs. Being informed on all your 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