Trucking Companies and Cash Flow: What Are the Potentials?
Though often overlooked, the trucking industry is essential 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 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 controversy. But for small to mid-size companies operating on a strong budget, it might not be an option. Expenses with regard to example 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 it is a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside borrowing. The following are some strategies for 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 draws on on the creditworthiness of the trucking company’s customers.
At the time of the sale, the client gets 80-90% belonging to the cash back immediately from the bills. 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 businesses that cannot manage to wait for payment, as well as the cost is frequently 4-5% monthly with a powerful annual price typically between 18-30%.
Bank Loans
Though difficult to come by, bank loans are most of the cheapest involving financing. The money process involves an application and breakdown of the company’s creditworthiness and financial history. Small companies especially tend to be turned down for loans, although exceptions do be.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s savings. This form of funding greatest for for trucking outfits having a great credit record and don’t require the money immediately.
Cash-Advances
Cash advances take place when a company receives an advance sum from your local neighborhood lender. The company pays loan provider back with percentages of that monthly card receipts before the loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and they cannot be changed retroactively. The benefit to cash advances is immediate cash- occasion 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 the short amount your own time and have limited financing options. Costly is usually 20% if not more.
Lease-Back
A trucking company may want to sell property, plant, and/or equipment, and simultaneously leases it back for resources.
It is better for trucking companies with valuable plant or equipment assets which usually underutilized, and the cost is monthly lease payments in addition to depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, that’s why it is close to them to locate funding solutions that meet their individual needs. Being informed on all possibilities is the first step toward finding a suitable cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
