Trucking Companies and Cash Flow: What Are the Choices?
Though often overlooked, the trucking industry is really important to the health within 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 within 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 strong budget, it might halt 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 actually not a recipe for financial hardship.
Therefore, trucking companies often have to show to outside borrowing. The following are some methods 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 is based on the creditworthiness of the trucking company’s customers.
At the amount of the sale, customer gets 80-90% of this 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 choice is best for B2B companies that cannot afford to wait for payment, along with the cost is 4-5% monthly with a powerful annual interest rate typically between 18-30%.
Bank Loans
Though tough to come by, bank loans are most of the cheapest involving financing. The money process involves an application and breakdown of the company’s creditworthiness and financial story. Small companies especially tend to be denied for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s savings. This form of funding is better for trucking outfits having a great credit record and have no need for the money immediately.
Cash-Advances
Cash advances take place when an organization receives a loan sum from your local neighborhood lender. The company pays loan provider back with percentages of their monthly card receipts up to the loan (plus a predetermined rate) is repaid. Happen to be legal limits to the rates, and they cannot be changed retroactively. The help cash advances is immediate cash- can be the fastest method for obtaining cash without in order to be a loan shark.
This financing method very best for trucking companies who require immediate cash for any amount of one’s time and have limited financing options. Will not find 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 earnings.
It is best for trucking companies with valuable plant or equipment assets that are underutilized, and the cost is monthly lease payments additionally, the depreciation and tax burdens of gadget.
Choices, Choices
Every trucking company is unique, that’s why it is up to them to find funding solutions that meet their individual needs. Being informed on all options is begin step toward finding a fitting cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
