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.
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 good 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 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 turn to outside backing. The following are some strategies for trucking companies to consider:
Also known as factoring, this options refers to the process by which businesses sell their accounts receivables to a factoring company. Approval for factoring is based on the creditworthiness of the trucking company’s customers.
At the use of the sale, customer gets 80-90% belonging to the cash back immediately from the receipts. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This choices best for B2B companies that cannot manage to wait for payment, along with the cost usually 4-5% monthly with a healthy annual rate typically between 18-30%.
Though tough to come by, bank loans are usually the cheapest type of financing. The money process involves an application and athleanx workout review the company’s creditworthiness and financial track record. Small companies especially tend to be denied for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s banking. This form of funding ideal for for trucking outfits having a great credit ratings and don’t want the money immediately.
Cash advances take place when business receives a loan sum from our lender. The corporate pays the lending company back with percentages associated with their monthly card receipts up to the loan (plus a predetermined rate) is repaid. Undoubtedly are a legal limits to the rates, and they cannot be changed retroactively. The benefits of cash advances is immediate cash- the time the fastest method for obtaining cash without going to a loan shark.
This financing method is the for trucking companies who require immediate cash for a short amount your own time and have limited financing options. The cost is usually 20% or more.
A trucking company might want to sell property, plant, and/or equipment, and simultaneously leases it back for cash.
It is best for trucking companies with valuable plant or equipment assets which usually underutilized, and the cost is monthly lease payments plus the depreciation and tax burdens of gadget.
Every trucking company is unique, and it is well over them to discover funding solutions that meet their individual needs. Being informed on all possibilities is one step toward finding a worthwhile cash flow solution.
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