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 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 controversy. But for small to mid-size companies operating on a strict budget, it might ‘t be an option. Expenses like payroll and gas sum up in the time between payment, and not paying your drivers is never a good business practice. Add to that rising fuel costs, delays due to traffic congestion, driver shortages and new regulations, and is definitely a recipe for financial hardship.
Therefore, trucking companies often have to show to outside financing. The following are some strategies to 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 is based on the creditworthiness of the trucking company’s customers.
At the amount of the sale, the client gets 80-90% of this cash back immediately from the receipts. The remainder of the balance comes after customer repayment, less a percentage fee that typically ranges from 1-5%.
This option is best for B2B firms that cannot afford to wait for payment, and the cost is frequently 4-5% monthly with an effective annual pace typically between 18-30%.
Bank Loans
Though in order to come by, bank loans are these cheapest type of financing. The loan process involves an application and overview of the company’s creditworthiness and financial story. Small companies especially are more likely to be rejected for loans, although exceptions do live.
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 using a great credit report . and don’t want the money immediately.
Cash-Advances
Cash advances take place when an organization receives a loan sum from a lender. Business pays the lending company back with percentages regarding their monthly card receipts before the loan (plus a predetermined rate) is repaid. There are a bunch legal limits to the rates, and they cannot be changed retroactively. The benefit to cash advances is immediate cash- is certainly 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 a short amount of time and have limited financing options. Zox pro training system is usually 20% or even more.
Lease-Back
A trucking company may wish to sell property, plant, and/or equipment, and simultaneously leases it back for cash money.
It ideal for for trucking companies with valuable plant or equipment assets which usually 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, make use of is up to them to discover funding solutions that meet their individual needs. Being informed on all options is one step toward finding a fitting cash flow solution.
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