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Freight Factoring Companies Can Help Trucking Firms Navigate Stricter Federal Regulations
Recent changes to federal drive-time regulations will have a serious impact on profitability among smaller trucking firms according to a recent article in Bloomberg BusinessWeek. The regulations took effect on July 1, 2013, and were the result of extensive research on the part of the Federal Motor Carrier Safety Administration (FMCSA) on the effects of fatigue for long-haul truckers. The added labor costs and paperwork required to implement these new rules prompted a challenge by the American Trucking Associations Inc. It is still unclear whether these new rules will increase safety within the trucking industry. However, most experts do agree that the changes to drive-time regulations will reduce productivity and cost-efficiency by between 3 to 6 percent.
Balancing Safety and Productivity
The over-the-road trucking industry has been battling these changes for over 14 years. On one side, safety experts and regulators stress the positive effects of reduced driving times in reducing driver fatigue and decreasing the number of accidents that involve large trucks on U.S. streets and highways. Trucking firms, however, note that the new regulations will cost approximately $18 billion in lost productivity and added expenses necessary to implement the new regulations. For companies working on a limited profit margin, these new costs could create disastrous cash flow shortfalls that could threaten the firm's survival in this competitive industry.
Cash Flow Management Strategies
Finding a way to manage these added cash flow challenges is an essential key to continued success in the trucking field, especially for smaller companies without extensive cash reserves to accommodate the added costs of new drive-time regulations. Traditional banking institutions may be of little help for these companies; the current credit crunch situation has left many lenders unwilling or unable to fund loans for firms without exceptional financial credentials or extensive collateral to offer. For trucking companies in need of immediate funding, asset-based lenders may be the best solution.
Accounts Receivable Based Lending
Accounts receivable lending arrangements use outstanding invoices due to the trucking firm as the collateral for loans and lines of credit. By putting these assets to work, smaller firms can obtain a sizable percentage of their value as immediate funding to manage paperwork requirements and to take on new drivers to fill the gap created by new federal regulations. Asset-based lenders can provide real help for companies struggling to maintain their market position in the wake of these new trucking industry rules.
Freight Factoring Companies like 1st Commercial Credit can help even when traditional banks cannot. For small trucking companies, obtaining asset-based loans and lines of credit from 1st Commercial Credit can provide valuable breathing room when managing the effects of federal regulation in this competitive marketplace.