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A Look At Financing Options For Trucking Companies

Whether you are looking to finance a new trucking company, finance equipment for your yard, or finance invoices, there are many money options available for owner-operators or others looking to become a part of – or expand – the trucking industry footprint.

Owners of trucking companies understand how important it is to stay organized, keep money flowing and keep trucks on the road. Freight does not move unless truck drivers are moving it. And with a shortage of truck drivers available for motor carriers to hire, they must ensure they are on top of their game to attract the top talent.

The thing is, remaining competitive in the trucking industry calls for continual investment in your operation. Tractors and trailers require periodic maintenance and the occasional changing of a worn-out part. Where the rubber hits the road is factoring financial demands into the equation. From delivering on truck driver wages to paying liability insurance to fuel and toll expenses. Trucking companies have a lot to worry about where the financial security of the organization is concerned.

In order to effectively manage these different factors and claim a piece of the market, trucking companies and startup operators need to partner up with a reliable source of funding whether that be a bank or a freight factoring firm. Effective financial partners will be able to offer affordable, flexible financing options for trucking companies of all types. Custom-tailored solutions should help businesses meet their financial goals and have access to capital, even with bad credit.

Financing Equipment

Loans for commercial motor vehicle, accessory, and trailer equipment differ from those used for passenger vehicle financing. Local banks typically do not offer funding for those types of purchases. And while some banks do advertise financing options for small businesses looking to expand their equipment or business space, trucking companies often find it harder to come by consistent and reliable funding options. Why? Because, statistically, trucking companies have higher failure rates for new businesses.

Still, this doesn’t make equipment financing harder to come by. Operators must know who to talk to and where to look. There are small agencies out there that specialize in lending for commercial motor vehicles and associated equipment, whether it be for trucks, trailers, vans, box trucks, sprinters, tractors, combines, dump trucks or excavators.

Businesses have to put there foundation down somewhere, and commercial motor vehicle loans can be found. Often the agencies who provide this funding are utilizing their own finance, rather than using third-party funds. The beauty of working with agencies like these is that they are able to finance in whatever situations they want. Even if a potential operator has a bankruptcy on their credit, they may still be able to get financing for their fledgling trucking business.

What to Expect

It is important that trucking operators understand the verbiage behind financing and know what they are getting into. If you see a lender advertising attractive interest rates with no money down or little-to-no deposit, these loans are for individuals or entities that have excellent credit with no negative marks. For those looking for financing with less-than-stellar credit, interest rate ranges from 10% – 30% can be expected. Higher deposits can also be expected of those looking for financing with tough credit histories.

As an example, if you want to get a loan for $50,000 to buy equipment and you qualify for a 30% deposit, then you are going to have to come up with $15,000. It is critically important that operators understand that making payments on time could be the determinant on whether the equipment that money was just put down on doesn’t get repossessed.

Working with a trucking funding option does not need to require a lot of paperwork in the modern era. Many financing companies have streamlined their operation to the point that upon approval, the trucking company has near-immediate access to funds with very little delay. These new funds could be used for anything from upgrading existing vehicles and equipment to hiring new staff or extending business range of operations.

A trucking company that is managed well can provide big returns for the owner. The problem lies in the capital investiture required to open a trucking company. Those looking to break into the industry must ensure they have access to the financing they need to purchase equipment and fund business ventures. In most cases you can apply online, fill out a few basic business-relevant questions and have access to capital for equipment financing.

Here are some quick tips for finding financing:

  • Equipment Lenders: Equipment lenders encompass agencies, institutions, and banks that provide capital to companies large and small to finance equipment.
  • Franchise Lending Agreements: Franchise lending agreements allow owner-operators to expand their business under the centralized name of the business they are partnering with.
  • Freight Factoring: Overcoming delays in invoice fulfillment pose major problems for motor carriers both large and small. With banks setting stringent lending conditions, freight factoring can be an answer.
  • Bank Loans: Bank loans can be counted on to address cash flow issues or expand business operations, whether it be to invest in new equipment or expand operations.

Freight Factoring on the Rise

With the ELD mandate firmly on the rise, many trucking companies are looking for new ways to fund their operations without having to rely on banks, which are not always reliable in their ability to fund fledgling trucking companies. This is why trucking companies look to freight factoring.

When shippers, receivers, or other partners cannot pay their invoices, trucking companies are caught in a bind. Not having access to accounts receivables when they are due can create big headaches for the back office as they try to work through cash flow issues that are likely to pile up as a result of the unpaid invoices.

We have to remember that yesterday’s dollars pay for whatever truck drivers are paying at the pump today. When those dollars aren’t available, the fuel might not be as easy to come by. Freight factoring agencies can purchase those unpaid invoices for a small fee and provide immediate financing.

The truth is, there are many trucking companies – whether owner-operators or large fleets – who live and die by freight factoring. It fills a critical need where cash flow is concerned. When you talk about financing options for trucking companies, freight factoring must be considered.

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