Trucking Companies and Cash Flow: What Are the Options?
Though often overlooked, the trucking industry is vitally important to the health on 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 problem. But for small to mid-size companies operating on a tight budget, it might stop an option. Expenses since payroll and gas calculate in the time between payment, and not paying your drivers is never a good business approach. Add to that rising fuel costs, delays due to traffic congestion, driver shortages and new regulations, and is definitely a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside financing. The following are some methods trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to implies 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, the client gets 80-90% of this cash back immediately from the statements. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This choices best for B2B businesses that cannot afford to wait for payment, and the cost is often 4-5% monthly with an impressive annual interest rate typically between 18-30%.
Bank Loans
Though tough to come by, bank loans are these cheapest involving financing. The borrowed funds process involves an application and analysis of the company’s creditworthiness and financial profile. Small companies especially can be refused for loans, although exceptions do live.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s banking. This form of funding greatest for for trucking outfits along with a great credit report . and have no need for the money immediately.
Cash-Advances
Cash advances take place when business receives an advance sum from your local neighborhood lender. Business pays the lending company back with percentages of that monthly card receipts until the loan (plus a predetermined rate) is repaid. Happen to be legal limits to the rates, and so they also cannot be changed retroactively. The benefits of cash advances is immediate cash- the time the fastest method for obtaining cash without likely to a loan shark.
This financing method ideal for trucking companies who need immediate cash for the short amount of time and have limited financing options. Will not find is usually 20% or more.
Lease-Back
A trucking company might want to sell property, plant, and/or equipment, and simultaneously leases it back for earnings.
It ideal for trucking companies with valuable plant or equipment assets which might be underutilized, as well as the cost is monthly lease payments as well as the depreciation and tax burdens of machines.
Choices, Choices
Every trucking company is unique, and in addition it is almost them to search out funding solutions that meet their individual needs. Being informed on all the choices is initial step toward finding a sufficient cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
