Trucking Companies and Cash Flow: What Are the Options?
Though often overlooked, the trucking industry is critical 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 chore. But for small to mid-size companies operating on a strict budget, it might halt an option. Expenses like payroll and gas sum up in the time between payment, and not paying your drivers is never a good business repeat. 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 show to outside financing. The following are some strategies for 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 founded on on the creditworthiness of the trucking company’s customers.
At the duration of the sale, the client gets 80-90% of the cash back immediately from the receipts. 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 manage to wait for payment, and also the cost is often 4-5% monthly with a healthy annual interest rate typically between 18-30%.
Bank Loans
Though difficult to come by, bank loans are usually the cheapest associated with financing. The borrowed funds process involves an application and review of the company’s creditworthiness and financial history. Small companies especially possess a be thrown to the wolves for loans, although exceptions do be.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s savings. This form of funding greatest for for trucking outfits along with a great credit ratings and do not require the money immediately.
Cash-Advances
Cash advances take place when an organization receives a loan sum during a lender. They pays the lender back with percentages regarding their monthly card receipts prior to loan (plus a predetermined rate) is repaid. There are 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 gonna be a loan shark.
This financing method is better 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 older.
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 which might be underutilized, as well as the cost is monthly lease payments not to mention the depreciation and tax burdens of gadget.
Choices, Choices
Every trucking company is unique, and in addition it is nearly them to find funding solutions that meet their individual needs. Being informed on all the choices is one step toward finding a worthwhile cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
