Though often overlooked, the trucking industry is truly essential 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 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 good budget, it might not be an option. Expenses like payroll and gas sum 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 financing. The following are some options 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 draws on on the creditworthiness of the trucking company’s customers.
At the amount of the sale, the client gets 80-90% of the cash back immediately from the receipts. 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 companies that cannot afford to wait for payment, and the cost is usually 4-5% monthly with annual interest rate typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are usually the cheapest way of financing. The loan process involves an application and overview of the company’s creditworthiness and financial track record. Small companies especially tend to be rejected for loans, although exceptions do live.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s bank account. This form of funding greatest for for trucking outfits using a great credit file and don’t require the money immediately.
Cash-Advances
Cash advances take place when business receives a loan sum from our lender. The corporate pays the lending company back with percentages regarding their monthly card receipts just before loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and they cannot be changed retroactively. The benefit to cash advances is immediate cash- can be 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 this time and have limited financing options. Will not find is usually 20% or even more.
Lease-Back
A trucking company may wish to sell property, plant, and/or equipment, and simultaneously leases it back for resources.
It ideal for trucking companies with valuable plant or equipment assets which usually underutilized, and also the cost is monthly lease payments additionally, the depreciation and tax burdens of machines.
Choices, Choices
Every trucking company is unique, and in addition it is close to them to locate funding solutions that meet their individual needs. Being informed on all your options 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