Though often overlooked, the trucking industry is essential 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 in 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 problem. But for small to mid-size companies operating on a tight budget, it might stop an option. Expenses such as 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 a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside borrowing. The following are some choices trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to the process 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 use of the sale, the client gets 80-90% of the cash back immediately from the bills. 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 manage to wait for payment, along with the cost is often 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 way of financing. The loan process involves an application and review of the company’s creditworthiness and financial track record. Small companies especially can be denied for loans, although exceptions do live.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s financial institution. This form of funding is better for trucking outfits using a great credit ratings and don’t want the money immediately.
Cash-Advances
Cash advances take place when a small-business receives funding sum from the lender. They pays the lending company back with percentages from their monthly card receipts prior to loan (plus a predetermined rate) is repaid. Happen to be legal limits to the rates, and also cannot be changed retroactively. The benefits of cash advances is immediate cash- it is the fastest method for obtaining cash without in order to a loan shark.
This financing method is the for trucking companies who need immediate cash for any amount of one’s time and have limited financing options. Zox pro training system is usually 20% or older.
Lease-Back
A trucking company may choose to sell property, plant, and/or equipment, and simultaneously leases it back for resources.
It very best for trucking companies with valuable plant or equipment assets which might be underutilized, and the cost is monthly lease payments additionally, the depreciation and tax burdens of tools.
Choices, Choices
Every trucking company is unique, and in addition it is nearly them to discover funding solutions that meet their individual needs. Being informed on all options is one step toward finding the right cash flow solution.
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