Finding Working Capital When Banks Are Tightening Requirements

Working capital is crucial to the success of trucking companies. However, as banks tighten credit requirements and lower lending limits, carriers need a reliable source of working capital to maintain operations.

Banks and Working Capital

Banks have been tightening their requirements since the Great Recession of 2008. The collateral and minimum business credit ratings have been going up, making it more difficult for trucking companies to access loans.

Simultaneously, traditional lending channels have been reducing the amount businesses receive from loans or placing limits on the amount businesses can borrow.

Trucking Companies and Loans

While loans may seem like the “go to” answer for working capital, the debt that comes with them can severely impact the cash flow of your trucking business. Loans lower credit ratings, and the monthly payments on the balance take a portion of revenue that is usually allotted for overhead or growth capital.

In tight economic conditions, the strain on cash flow caused by traditional loans can prevent trucking companies from maintaining operations, especially when revenue from invoices is staggered by 30, 60, or even 90 days.

Additionally, interest rates on bank loans are unpredictable, and can experience rate hikes during strong economic conditions. Businesses – trucking companies in particular – need a better alternative to traditional loans.

Working Capital without Loans

Fortunately, trucking companies can pivot away from debt-based loans and still get the working capital they need to thrive and grow. Instead of lowering credit ratings and dealing with the red tape of traditional lending channels, trucking companies use freight factoring.

Freight factoring leverages unpaid receivables and immediately converts them into working capital. This allows trucking companies to sidestep debt while boosting cash flow at the same time. Instead of waiting 30 days or longer to receive payments for completed jobs, trucking companies can factor their receivables and get access to working capital within 24 hours.

The Leader in Freight Factoring

Express Freight Finance is a national leader for factoring services designed for the trucking industry. Our business was founded by people with deep roots in the trucking industry, so we understand the needs of trucking companies. Our team will work with you to create a factoring strategy tailored to your needs so you can quickly reach your goals. Contact our offices today to get started.