Though often overlooked, the trucking industry is truly essential to the health for 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 within 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 controversy. But for small to mid-size companies operating on a decent budget, it might not be an option. Expenses like payroll and gas come 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 borrowing. The following are some strategies to 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 centered on the creditworthiness of the trucking company’s customers.
At the time of the sale, customer gets 80-90% belonging to the cash back immediately from the debts. The remainder of the balance comes after customer repayment, less a portion fee that typically ranges from 1-5%.
This choices are best for B2B companies that cannot afford to wait for payment, as well as the cost is 4-5% monthly with a powerful annual rate typically between 18-30%.
Bank Loans
Though difficult to come by, bank loans are often the cheapest involving financing. The borrowed funds process involves an application and breakdown of the company’s creditworthiness and financial story. Small companies especially tend to be refused for loans, although exceptions do be.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s financial institution. This form of funding ideal for for trucking outfits having a great credit ratings and don’t require the money immediately.
Cash-Advances
Cash advances take place when a small-business receives an advance sum during a lender. The company pays the lending company back with percentages associated with their monthly card receipts until the loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and they will 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 is the for trucking companies who need immediate cash for regarding amount your own time and have limited financing options. Zox pro training system is usually 20% or even more.
Lease-Back
A trucking company may choose 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 usually underutilized, and also the cost is monthly lease payments as well as the depreciation and tax burdens of resources.
Choices, Choices
Every trucking company is unique, make use of is nearly them to locate funding solutions that meet their individual needs. Being informed on all the choices is the first step toward finding a sufficient cash flow solution.
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