Though often overlooked, the trucking industry is essential to the health on 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 problem. But for small to mid-size companies operating on a strict budget, it might stop being an option. Expenses regarding payroll and gas calculate 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 a recipe for financial hardship.
Therefore, trucking companies often have flip to outside backing. The following are some strategies to 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 duration of the sale, the client gets 80-90% of this cash back immediately from the bills. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This choice is best for B2B businesses that cannot afford to wait for payment, and the cost is often 4-5% monthly with an impressive annual rate typically between 18-30%.
Bank Loans
Though hard to come by, bank loans are often the cheapest form of financing. The loan process involves an application and review of the company’s creditworthiness and financial profile. Small companies especially tend to be turned down for loans, although exceptions do live.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s savings. This form of funding ideal for for trucking outfits with a great credit history and have no need for the money immediately.
Cash-Advances
Cash advances take place when an organization receives an advance sum from our lender. The corporate pays the lender back with percentages of that monthly card receipts up to the loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and they cannot be changed retroactively. The advantage of cash advances is immediate cash- occasion the fastest method for obtaining cash without going to a loan shark.
This financing method is best for trucking companies who require immediate cash for regarding amount of one’s time and have limited financing options. Zox pro training system 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 moola.
It ideal for for trucking companies with valuable plant or equipment assets usually are underutilized, and the cost is monthly lease payments additionally, the depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, and it is up to them inside your funding solutions that meet their individual needs. Being informed on all options is initial step toward finding a sufficient cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
Posted on:
September 18, 2019