Trucking Companies and Cash Flow: What Are the Choices?
Though often overlooked, the trucking industry is 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 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 stop being an option. Expenses with regard to example payroll and gas provide in the time between payment, and not paying your drivers is never a good business approach. 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 to show to outside a mortgage. The following are some options for trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to might 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 amount of the sale, customer gets 80-90% of 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 option is best for B2B firms that cannot manage to wait for payment, along with the cost is frequently 4-5% monthly with a healthy annual price typically between 18-30%.
Bank Loans
Though tough to come by, bank loans are these cheapest form of financing. The money process involves an application and review of the company’s creditworthiness and financial reports. Small companies especially are more likely to be thrown to the wolves for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s life’s savings. This form of funding is the for trucking outfits having a great credit history and do not require the money immediately.
Cash-Advances
Cash advances take place when an organization receives funding sum from our lender. The organization pays loan provider back with percentages of 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 profit to cash advances is immediate cash- is certainly the fastest method for obtaining cash without going to a loan shark.
This financing method ideal for trucking companies who require immediate cash for a short amount your own 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 very best for trucking companies with valuable plant or equipment assets that are underutilized, along with the cost is monthly lease payments not to mention the depreciation and tax burdens of gadget.
Choices, Choices
Every trucking company is unique, make use of is nearly them to search out funding solutions that meet their individual needs. Being informed on all the options is initial step toward finding a worthwhile cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
