Though often overlooked, the trucking industry is vitally important 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 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 huge concern. But for small to mid-size companies operating on a tight budget, it might halt an option. Expenses such as 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 to turn to outside backing. The following are some methods trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to difficult . 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% belonging to the cash back immediately from the statements. The remainder of the balance comes after customer repayment, less a percentage fee that typically ranges from 1-5%.
This choices best for B2B firms that cannot manage to wait for payment, along with the cost usually 4-5% monthly with a powerful annual price typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are these cheapest associated with financing. The borrowed funds process involves an application and overview of the company’s creditworthiness and financial reports. Small companies especially will usually be turned down for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s savings. This form of funding is better for trucking outfits using a great credit record and don’t need 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 loan provider back with percentages of their monthly card receipts prior to loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, which cannot be changed retroactively. The benefit to cash advances is immediate cash- the time the fastest method for obtaining cash without in order to a loan shark.
This financing method ideal for trucking companies who require immediate cash for a short amount associated with your and have limited financing options. Zox pro training system is usually 20% and up.
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 usually are underutilized, and the cost is monthly lease payments not to mention the depreciation and tax burdens of machines.
Choices, Choices
Every trucking company is unique, that’s why it is up to them to find funding solutions that meet their individual needs. Being informed on all the choices 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