Trucking Companies and Cash Flow: What Are the Choices?
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 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 huge concern. But for small to mid-size companies operating on a strict budget, it might stop being an option. Expenses like payroll and gas come 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 this is a recipe for financial hardship.
Therefore, trucking companies often have flip to outside funding. The following are some options 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 use of the sale, the client gets 80-90% of this cash back immediately from the receipts. The remainder of the balance comes after customer repayment, less a percentage fee that typically ranges from 1-5%.
This choices best for B2B businesses that cannot manage to wait for payment, along with the cost is frequently 4-5% monthly with an impressive annual rate typically between 18-30%.
Bank Loans
Though tough to come by, bank loans are an cheapest associated with financing. The money process involves an application and breakdown of the company’s creditworthiness and financial profile. Small companies especially possess a be rejected for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s life’s savings. This form of funding is better for trucking outfits using a great credit file and do not require the money immediately.
Cash-Advances
Cash advances take place when a small business receives an advance sum from our lender. The organization pays the lender back with percentages associated with their monthly card receipts until the loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, and they cannot be changed retroactively. The help cash advances is immediate cash- is certainly the fastest method for obtaining cash without gonna be a loan shark.
This financing method is the for trucking companies who need immediate cash for a much smaller amount of this time and have limited financing options. The cost is usually 20% if not more.
Lease-Back
A trucking company could sell property, plant, and/or equipment, and simultaneously leases it back for cash.
It is best for trucking companies with valuable plant or equipment assets which might be underutilized, as well as the cost is monthly lease payments in addition to depreciation and tax burdens of machines.
Choices, Choices
Every trucking company is unique, and it is nearly them to search out funding solutions that meet their individual needs. Being informed on all options is one step toward finding a suitable cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
