Though often overlooked, the trucking industry is vitally important 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.
Despite the importance of trucking companies, the way the system is structured often leaves them within 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 chore. But for small to mid-size companies operating on a good budget, it might not be an option. Expenses such as payroll and gas add up in the time between payment, and not paying your drivers is never a good business rehearsal. 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 backing. The following are some choices 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 draws on on the creditworthiness of the trucking company’s customers.
At the time period of the sale, the client gets 80-90% for 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 choices best for B2B businesses that cannot afford to wait for payment, along with the cost usually 4-5% monthly with an impressive annual interest rate typically between 18-30%.
Though tough to come by, bank loans are often the cheapest type of financing. Mortgage loan process involves an application and breakdown of the company’s creditworthiness and financial profile. Small companies especially can be turned down for loans, although exceptions do be.
After approval, fund disbursement usually takes about 30-90 days to reach a trucking company’s bank account. This form of funding is better for trucking outfits with a great credit ratings and don’t want the money immediately.
Cash advances take place when a small-business receives a loan sum from the lender. The corporate pays the lending company 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 so they also cannot be changed retroactively. The help cash advances is immediate cash- the time the fastest method for obtaining cash without likely to a loan shark.
This financing method very best for trucking companies who need immediate cash for the short amount of this time and have limited financing options. Cost of is usually 20% or more.
A trucking company could sell property, plant, and/or equipment, and simultaneously leases it back for cash money.
It is best for trucking companies with valuable plant or equipment assets usually are underutilized, along with the cost is monthly lease payments as well as the depreciation and tax burdens of resources.
Every trucking company is unique, that’s why it is well over them to find funding solutions that meet their individual needs. Being informed on all options is begin step toward finding a suitable cash flow solution.
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