With such an incredible number of financial institutions out there, it’s no surprise there are loans more specifically fit for trucking companies and businesses. Cash flow can be inconsistent in the trucking industry and whatever your need for a business cash advance, the right one to heed is ahead.
Loans can be daunting and if you don’t read the fine print, you can quickly find yourself in trouble. Avoid the hassles and learn about the best ways you can help your trucking business gain the capital it requires without putting yourself at risk.
What Is a Business Cash Advance?
An important detail to know about a business cash advance or a merchant cash advance is that it is not a loan. These cash advances provide businesses with financing in exchange for a portion of their future credit card sales.
A major appeal of a cash advance is that there is no loan application, and high credit scores are rarely a requirement. Your repayment of the cash advance will be derived from your sales, which can be far less troublesome than a loan.
However, it does often come with greater interest rates. This can be an excellent option depending on your business’ needs.
Why Would I Need a Cash Advance For My Trucking Business?
Even when you don’t own or operate your own business, it’s nothing new that not all invoices get paid on time. Cash flow is critical when running a business and whatever your need for funds are, the right ways to obtain them are out there.
Whether you simply need financing assistance with your ever growing stack of invoices or if you’re looking to grow your business, there are multiple cash advance and loan options that are better suited for trucking companies.
Because these are not your traditional business loans, they often come with far less regulations which gives you the flexibility to use them for what you truly need. Hiring and paying employees, buying new equipment, you name it, there are ways to keep yourself covered financially.
See what factoring companies are and what they can do for your business here.
3 Different Ways to Get a Trucking Business Cash Advance
Help is out there! Keep reading to learn about three great ways to help your trucking business when cash flow is suffering.
Invoice factoring involves selling your business’s outstanding invoices to a factoring company for a small percentage in exchange for payment. When you have an agreement with an invoice factoring company, you’ll typically see your funds within 48 hours.
Invoice factoring does require you to have a current, operating business so that you have outstanding invoices to apply with. Get more details about how invoice factoring works here.
If you think factoring with a company is the best route for your business, learn about the best factoring companies for truckers and apply in no time. Invoice factoring can be incredibly beneficial when cash flow is limited.
Small Business Administration (SBA) Loans
There are several different types of SBA loans that are ideal for trucking companies and businesses in the trucking industry. One huge advantage of these loans is that they are often available for those that don’t qualify for your traditional business loan.
Three types of SBA loans derived more for the trucking industry are:
- SBA 7(a) Loan: The standard SBA 7(a) loan allows borrowers to receive up to $5 million. This is one of the more common SBA loan options for trucking companies. This loan can be used for nearly any needs of your business. This includes equipment, land or real estate, or even purchasing an additional business.
- SBA Microloans: An ideal option for owner-operators and smaller trucking companies, these loans offer up to $50,000. The average microloan is $13,000. These loans can be used for equipment, machinery, inventory, supplies, or working capital.
- Veterans Advantage Loan: These loans are the same as the SBA 7(a) loans, but they have reduced fees and are only available to veterans and servicemembers.
Merchant Cash Advances
Merchant cash advances help provide businesses with the financing they require and this is often a great route when qualifying for a traditional business loan is out of the question. Merchant cash advances allow the business to borrow funds in exchange for a percentage of their business’s revenue, typically credit card transactions.
While this can be a great option when you need more flexibility, these often come with higher interest rates. While a merchant cash advance isn’t technically a loan, it’s important to consider the pros and cons of each type of loan before you decide which one is best.
Business Cash Advances vs Invoice Factoring
Both business cash advances and invoice factoring can be excellent alternatives to traditional business loans. While there are several varying factors between business cash advances and invoice factoring, the main one remains that cash advances are based on the business’s future revenue while invoice factoring is based on the business’s selected invoice(s). This means that your cash advance payment is based on future sales while invoice factoring payments are based on actual sales.
Cash advances are known to have much higher interest rates, while invoice factoring comes with lower financing options. Both options can help provide the capital your business requires, look into your options completely to ensure you’re making the best move for your business.
Get the Financing You Need Without the Risks
While traditional business loans can be a necessity, they are not the answer for every business or industry. There are cash advance options available for those that don’t want to apply or don’t qualify for traditional business loans.
For many businesses and companies in the trucking industry, cash advance options are becoming more and more common. These financing options can help your trucking business gain the capital it needs without putting yourself and so much at risk. Help your business grow today!
Yes, there are several different types of business loans and financing options available for those in the trucking industry. There are varying SBA (Small Business Administration) loans, merchant cash advances, and options like invoice factoring available depending on your needs.
Merchant cash advances work by providing financing for business owners in exchange for a determined portion of the business’s revenue over a set period of time. This is typically recouped daily through the business’s credit card transactions.
No, cash advancing is not illegal. Merchant cash advances are legal and they often have fewer regulations than your traditional small business loan.
Sign up for a FreightWaves e-newsletter to stay informed of all news and trends impacting supply chain careers and operations.