Trucking Companies and Cash Flow: What Are the Potentials?
Though often overlooked, the trucking industry is truly essential to the health belonging to 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 huge concern. But for small to mid-size companies operating on a decent budget, it might stop being an option. Expenses like payroll and gas provide in the time between payment, and not paying your drivers is never a good business put into practice. 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 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 centered on the creditworthiness of the trucking company’s customers.
At the time of the sale, the client gets 80-90% of your cash back immediately from the invoices. 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 afford to wait for payment, along with the cost is usually 4-5% monthly with annual fee typically between 18-30%.
Bank Loans
Though difficult to come by, bank loans are most of the cheapest associated with financing. The money process involves an application and analysis of the company’s creditworthiness and financial history. Small companies especially will usually be rejected for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s life’s savings. This form of funding greatest for for trucking outfits by using a great credit history and don’t need 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 from their monthly card receipts prior to loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, which cannot be changed retroactively. The benefits of cash advances is immediate cash- the time the fastest method for obtaining cash without going to a loan shark.
This financing method is best for trucking companies who need immediate cash for regarding amount your own time and have limited financing options. The cost is usually 20% or older.
Lease-Back
A trucking company may choose to sell property, plant, and/or equipment, and simultaneously leases it back for moola.
It very best for trucking companies with valuable plant or equipment assets which might be underutilized, as well as the cost is monthly lease payments plus the depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, make use of is almost them to locate funding solutions that meet their individual needs. Being informed on all the choices is begin step toward finding the right cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
