Trucking Companies and Cash Flow: What Are the Potentials?
Though often overlooked, the trucking industry is really important to the health of 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 from 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 problem. But for small to mid-size companies operating on a decent budget, it might stop being an option. Expenses since payroll and gas provide in the time between payment, and not paying your drivers is never a good business rehearsal. 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 a mortgage. 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 use of the sale, customer gets 80-90% belonging to the cash back immediately from the bills. The remainder of the balance comes after customer repayment, less a percentage 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 usually 4-5% monthly with a healthy annual interest rate typically between 18-30%.
Bank Loans
Though in order to come by, bank loans are most of the cheapest way of financing. The money process involves an application and analysis of the company’s creditworthiness and financial story. Small companies especially tend to be rejected for loans, although exceptions do live.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s life’s savings. This form of funding ideal for for trucking outfits having a great credit ratings and don’t want the money immediately.
Cash-Advances
Cash advances take place when a small business receives funding sum from your local neighborhood lender. The organization pays the lending company back with percentages from their monthly card receipts up to the loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, and also cannot be changed retroactively. The advantage of cash advances is immediate cash- occasion the fastest method for obtaining cash without likely to a loan shark.
This financing method is the for trucking companies who need immediate cash for a short amount of time and have limited financing options. Will not find is usually 20% or even more.
Lease-Back
A trucking company may choose to sell property, plant, and/or equipment, and simultaneously leases it back for moola.
It is best for trucking companies with valuable plant or equipment assets which usually underutilized, and the cost is monthly lease payments in addition to depreciation and tax burdens of resources.
Choices, Choices
Every trucking company is unique, and in addition it is nearly them inside your funding solutions that meet their individual needs. Being informed on all your options is begin step toward finding a suitable cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
