Trucking Companies and Cash Flow: What Are the Policies?
Though often overlooked, the trucking industry is vitally important 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 problem. But for small to mid-size companies operating on a strong budget, it might not be an option. Expenses regarding payroll and gas come in the time between payment, and not paying your drivers is never a good business put into practice. 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 funding. The following are some choices 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 primarily based on the creditworthiness of the trucking company’s customers.
At the time of the sale, customer gets 80-90% belonging to the 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 options best for B2B companies that cannot manage to wait for payment, as well as the cost is 4-5% monthly with an effective annual price typically between 18-30%.
Bank Loans
Though tough to come by, bank loans are these cheapest form of financing. Mortgage loan process involves an application and breakdown of the company’s creditworthiness and financial profile. Small companies especially are more likely to be rejected for loans, although exceptions do be.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s life’s savings. This form of funding is the for trucking outfits with a great credit history and don’t need the money immediately.
Cash-Advances
Cash advances take place when a small-business receives an advance sum from a lender. They pays financial institution back with percentages from 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- is certainly the fastest method for obtaining cash without in order to be a loan shark.
This financing method is better for trucking companies who require immediate cash for the short amount associated with your and have limited financing options. Zox pro training system is usually 20% if not more.
Lease-Back
A trucking company may wish to sell property, plant, and/or equipment, and simultaneously leases it back for earnings.
It ideal for for trucking companies with valuable plant or equipment assets usually are underutilized, along with the cost is monthly lease payments not to mention the depreciation and tax burdens of machines.
Choices, Choices
Every trucking company is unique, and in addition it is up to them inside your funding solutions that meet their individual needs. Being informed on all the options is customers step toward finding the right cash flow solution.
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