Though often overlooked, the trucking industry is critical 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 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 problems. But for small to mid-size companies operating on a decent budget, it might stop an option. Expenses such as payroll and gas calculate 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 a recipe for financial hardship.
Therefore, trucking companies often have to show to outside borrowing. The following are some strategies to trucking companies to consider:
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 period of the sale, the client gets 80-90% of this cash back immediately from the bills. 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 companies that cannot afford to wait for payment, as well as the cost is usually 4-5% monthly with an effective annual fee typically between 18-30%.
Though tough to come by, bank loans are an cheapest type of financing. The loan process involves an application and overview of the company’s creditworthiness and financial profile. Small companies especially can 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 financial institution. This form of funding is better for trucking outfits along with a great credit report . and do not require the money immediately.
Cash advances take place when an organization receives a loan sum from a lender. They pays financial institution back with percentages associated with their monthly card receipts before the loan (plus a predetermined rate) is repaid. There are a bunch legal limits to the rates, and they will cannot be changed retroactively. The benefit to cash advances is immediate cash- occasion the fastest method for obtaining cash without in order to be a loan shark.
This financing method very best for trucking companies who require immediate cash for a much smaller amount of time and have limited financing options. Will not find is usually 20% if not more.
A trucking company could sell property, plant, and/or equipment, and simultaneously leases it back for cash.
It is better for trucking companies with valuable plant or equipment assets usually are underutilized, as well as the cost is monthly lease payments additionally, the depreciation and tax burdens of machines.
Every trucking company is unique, however it is nearly them to search out funding solutions that meet their individual needs. Being informed on all the choices is initial step toward finding a sufficient cash flow solution.
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