Though often overlooked, the trucking industry is critical 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.
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 problems. But for small to mid-size companies operating on a strict budget, it might ‘t be an option. Expenses regarding payroll and gas sum up 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 actually not a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside borrowing. The following are some strategies to trucking companies to consider:
Also known as factoring, this options refers to difficult . 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 amount of the sale, customer gets 80-90% of your 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 option is best for B2B firms that cannot manage to wait for payment, and the cost is often 4-5% monthly with a healthy annual interest rate typically between 18-30%.
Though difficult to come by, bank loans are usually the cheapest type of financing. Mortgage process involves an application and overview of the company’s creditworthiness and financial profile. Small companies especially possess a be refused for loans, although exceptions do be around.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s savings. This form of funding is better for trucking outfits along with a great credit ratings and don’t require the money immediately.
Cash advances take place when business receives funding sum from a lender. The company pays loan provider back with percentages of that monthly card receipts just before loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and so they also cannot be changed retroactively. The help cash advances is immediate cash- is certainly the fastest method for obtaining cash without going to a loan shark.
This financing method is the for trucking companies who need immediate cash for any amount your own time and have limited financing options. Will not find is usually 20% or older.
A trucking company may wish to sell property, plant, and/or equipment, and simultaneously leases it back for cash.
It ideal for for trucking companies with valuable plant or equipment assets which have been underutilized, as well as the cost is monthly lease payments in addition to depreciation and tax burdens of equipment.
Every trucking company is unique, however it is nearly them inside your funding solutions that meet their individual needs. Being informed on all options is initial step toward finding a worthwhile cash flow solution.
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