Though often overlooked, the trucking industry is critical 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.
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 chore. But for small to mid-size companies operating on a strong budget, it might stop an option. Expenses like payroll and gas come 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 it is a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside financing. The following are some strategies for trucking companies to consider:
Also known as factoring, this options refers to carpet by which businesses sell their accounts receivables to a factoring company. Approval for factoring centered 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 invoices. 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 also the cost is often 4-5% monthly with a powerful annual price typically between 18-30%.
Though hard to come by, bank loans are most of the cheapest type of financing. The loan process involves an application and analysis of the company’s creditworthiness and financial story. Small companies especially will usually be turned down for loans, although exceptions do be around.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s bank account. This form of funding is better for trucking outfits having a great credit history and don’t require the money immediately.
Cash advances take place when a company receives funding sum from the lender. The corporate pays the lending company back with percentages of their monthly card receipts until the loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and so they also cannot be changed retroactively. The profit to cash advances is immediate cash- it is the fastest method for obtaining cash without likely to a loan shark.
This financing method is the for trucking companies who need immediate cash for a much smaller amount your own time and have limited financing options. Costly is usually 20% if not more.
A trucking company might want to sell property, plant, and/or equipment, and simultaneously leases it back for moola.
It is best for trucking companies with valuable plant or equipment assets usually are underutilized, as well as the cost is monthly lease payments in addition to depreciation and tax burdens of equipment.
Every trucking company is unique, and in addition it is well over them to discover funding solutions that meet their individual needs. Being informed on all your options is customers step toward finding a sufficient cash flow solution.
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