Trucking Companies and Cash Flow: What Are the Choices?
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 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 tight budget, it might stop being an option. Expenses regarding payroll and gas come 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 to show to outside backing. The following are some strategies to 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 amount of the sale, customer gets 80-90% belonging to the cash back immediately from the invoices. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This options best for B2B firms that cannot afford to wait for payment, and the cost usually 4-5% monthly with a healthy annual fee typically between 18-30%.
Bank Loans
Though tough to come by, bank loans are an cheapest associated with financing. Mortgage process involves an application and breakdown of the company’s creditworthiness and financial track record. Small companies especially can be refused 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 the for trucking outfits using a great credit ratings and don’t require the money immediately.
Cash-Advances
Cash advances take place when an organization receives a loan sum from the lender. The company pays the lender back with percentages of their monthly card receipts until the loan (plus a predetermined rate) is repaid. There are a bunch legal limits to the rates, and they will cannot be changed retroactively. The benefits of cash advances is immediate cash- occasion the fastest method for obtaining cash without likely to a loan shark.
This financing method ideal for trucking companies who need immediate cash for a short amount of time and have limited financing options. Cost of is usually 20% or more.
Lease-Back
A trucking company may want 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 usually are underutilized, and 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 locate funding solutions that meet their individual needs. Being informed on all possibilities is the first step toward finding a worthwhile cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
