Trucking Companies and Cash Flow: What Are the Potentials?
Though often overlooked, the trucking industry is really 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 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 strong budget, it might ‘t be an option. Expenses such as 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 actually not a recipe for financial hardship.
Therefore, trucking companies often have to show to outside backing. The following are some options for trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to carpet by which businesses sell their accounts receivables to a factoring company. Approval for factoring primarily based on the creditworthiness of the trucking company’s customers.
At the duration of the sale, customer gets 80-90% for this 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 choice is best for B2B businesses that cannot afford to wait for payment, along with the cost usually 4-5% monthly with an effective annual fee typically between 18-30%.
Bank Loans
Though tough to come by, bank loans are usually the cheapest way of financing. The money process involves an application and overview of the company’s creditworthiness and financial track record. Small companies especially can be rejected for loans, although exceptions do be available.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s savings. This form of funding greatest for for trucking outfits having a great credit ratings and don’t require the money immediately.
Cash-Advances
Cash advances take place when an organization receives an advance sum during a lender. Business pays financial institution back with percentages from their monthly card receipts until the loan (plus a predetermined rate) is repaid. There are legal limits to the rates, and they will cannot be changed retroactively. The benefits of cash advances is immediate cash- it is the fastest method for obtaining cash without likely to a loan shark.
This financing method is best for trucking companies who require immediate cash for a short amount of one’s time and have limited financing options. Will not find is usually 20% or more.
Lease-Back
A trucking company may wish to sell property, plant, and/or equipment, and simultaneously leases it back for resources.
It ideal for trucking companies with valuable plant or equipment assets which have been underutilized, and the cost is monthly lease payments as well as the depreciation and tax burdens of machines.
Choices, Choices
Every trucking company is unique, and it is close to them to find funding solutions that meet their individual needs. Being informed on all the choices is begin step toward finding a worthwhile cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
