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 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 problems. But for small to mid-size companies operating on a tight budget, it might stop an option. Expenses such as payroll and gas sum 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 is actually not a recipe for financial hardship.
Therefore, trucking companies often have to show to outside financing. The following are some choices 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 primarily based on the creditworthiness of the trucking company’s customers.
At the time period of the sale, customer gets 80-90% of this cash back immediately from the statements. The remainder of the balance comes after customer repayment, less a portion fee that typically ranges from 1-5%.
This choices best for B2B businesses that cannot manage to wait for payment, along with the cost is frequently 4-5% monthly with annual rate typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are most of the cheapest type of financing. Mortgage loan process involves an application and review of the company’s creditworthiness and financial profile. Small companies especially are more likely to be refused for loans, although exceptions do be around.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s banking. This form of funding greatest for for trucking outfits with a great credit record and don’t require the money immediately.
Cash-Advances
Cash advances take place when an organization receives an advance sum from our lender. The company pays financial institution back with percentages associated with their monthly card receipts up to the loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, and so they also cannot be changed retroactively. The help cash advances is immediate cash- the time the fastest method for obtaining cash without likely to a loan shark.
This financing method ideal for trucking companies who require immediate cash for regarding amount your own time and have limited financing options. Costly is usually 20% if not 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 have been underutilized, along with the cost is monthly lease payments as well as the depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, and it 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 fitting cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444