1st Commercial Credit

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Managing Fuel and Staffing Expenses in the Trucking Industry with A/R Lending Solutions

The constant fluctuation of oil prices in the consumer marketplace have had a significant effect on the profitability of companies in the trucking, freighting and shipping industry. The Oil & Gas Journal recently noted that the cost of crude oil and gas is expected to rise once again over the next few months, leaving fuel-dependent companies on the hook for even higher prices as they head into the winter months. Managing the increased costs associated with higher fuel prices is the key to success and profitability in the trucking industry. Cash flow shortfalls can cripple the company's ability to compete and to meet the demands of customers in today's competitive marketplace.

The Credit Crunch

Recent economic downturns have reduced the availability of traditional credit sources for small to medium-sized businesses in the financial world. Traditional banks are less willing to extend credit unless the businesses meet increasingly stringent requirements and present sizable collateral for these loans. At the same time, trucking companies are subject to added federal regulation regarding the allowable driving time and hours worked by their employees. The rising cost of fuel and the need for specialized services in the shipping and freighting field have put many smaller companies in a real financial bind.

Finding the Right Funding Solutions

When traditional banks and lenders cannot or will not help, trucking companies can often obtain the credit they need to stay productive and profitable through alternative lenders. Asset-based lenders and trucking factoring companies use the value of outstanding accounts receivable amounts and purchase orders to finance lending arrangements for shipping and trucking companies. By tapping the value of these financial transactions prior to payment, companies can acquire the necessary funding to manage fuel price increases, staffing needs and other operational expenses.

The Basics of Asset-Based Lending

In most cases, asset-based lenders require only a small amount of financial documentation to evaluate loans for approval. The real key to achieving funding through these sources is in the collateral presented. Most trucking companies maintain a number of outstanding invoices for services already rendered. These invoices can serve as collateral for immediate funding. Most lenders can bill for and collect on the collateralized invoices directly. Once payment is received, the lender retains the amounts due and forwards the remainder to the trucking company. Meanwhile, the shipping firm has already received a significant percentage of the value of those invoices to manage ongoing expenses.

At 1st Commercial Credit, the loan process is simple and streamlined. Companies receive a decision within one working day and funding within five working days after approval. This can provide added flexibility for managing changing fuel costs and labor expenses in the modern trucking industry.