The trucking business is critical to the supply chain and the flow of the American economy. Despite market swings, startup and established trucking services are always in demand, and as a result, the industry is extremely competitive.
In reality, the trucking business creates one of the greatest income streams in the United States and transports 70% of all commodities.
Surviving the Startup Phase
Only 15% of new startup trucking firms will survive beyond their second year of operation, according to the National Association of Small Trucking Firms (NASTC).
The complexities and high expenses connected with owning and maintaining a trucking business might make it appear incredibly difficult to thrive. However, if handled properly, it can be a highly profitable business.
It is not simple to create and run a startup trucking company. Rising expenses, stringent regulations, volatile markets, and tough competition are just a few of the challenges that a small trucking company may face.
Trucking company loans, grants, and other types of funding can be a great way to bridge cash flow gaps or take advantage of an opportunity to expand your fleet. Read on to learn more about trucking business financing.
What are the Uses of Trucking Finance?
- Expansion of trucking fleet
Trucking businesses with big fleets often generate a higher return on investment. In addition to saving money on shipping per mile, larger businesses can save money on expenditures such as commercial vehicles and Semi Trucks, truck Trailers, load boards, licenses, insurance, gasoline, tolls, and so on.
If you presently have a restricted number of trucks, you may have to decline jobs. If you have to reject down clients, your company's financial line will suffer. You may take on more assignments and enhance your business earnings by extending your fleet. Developing your fleet is critical for placing yourself successfully in this competitive business.
- Hiring more drivers-
A sufficient number of drivers are required for your trucking company to flourish. However, various recruiting expenditures must first be purchased. To begin, you may need to spend money on hiring expenditures, such as employing a recruiter or posting on paid job sites. You must also be able to purchase training, commercial driving licenses, permits, insurance, probable union charges, staff uniforms, and personal equipment.
Although these fees may appear high, hiring extra drivers will help your trucking business. This sort of expansion is attainable with the help of a small company loan!
- Improving business logistics
Transportation and trucking businesses rely heavily on well-organized, flawless logistics. Without well-planned logistics systems, your startup company will most certainly fail to meet rising demand. Aside from logistical success, having logistics in place may assist your business's income.
Even if your transportation firm does not operate on a huge scale, you may nevertheless make logistical modifications. Improving your company's logistics entails several moving parts, like introducing vehicle tracking systems. These benefits are frequently discovered by process engineers, operations specialists, and even by employing automated data systems. You may invest in a system that efficiently suits your demands by asking for trucking company financing.
How to Secure Loans, Grants, and Other Funding?
Trucking firms have several financing alternatives accessible to them, each with its own set of advantages and disadvantages. Listed below are some of the ways to secure loans, grants, and other funding:
- Apply for SBA loans
Small Business Administration (SBA) loans are the most common government funding options for truckers and transportation enterprises. These loans are made by banks, financial institutions, and internet lenders, but they are backed by the US government. They can range from $30,000 to $5 million and assist you in handling some of the previously discussed charges.
The benefits of SBA loans include low-interest rates, little down payments, and extended payback terms. The disadvantage is that their application procedure might be lengthy and stringent. You'll most likely require a good credit score, a corporate structure, and a consistent credit score.
- Opting to lease equipment
Equipment leasing is a realistic alternative only for individuals who desire to rent rather than buy the vehicle or equipment. The disadvantage is that the equipment is not yours; it is only a temporary lease in which you pay monthly to utilize the equipment for a set length of time. Once the lease is paid off, you must return the truck or upgrade to another vehicle. Furthermore, due to the high-interest rates, leasing prices are typically greater than loans or other sources of finance.
- Apply for Short-term loans
Several internet lenders provide short-term loans to startups and small businesses, including trucking companies. A short-term loan may be an excellent financing choice for a trucking company that needs immediate access to a larger quantity of money that is paid out in a single sum.
In general, with this form of loan, you borrow and repay the money in a short length of time. The terms of these loans vary depending on the lender, but they often range from six months to three years. This frequently leads to a lower borrowing cost than a long-term loan. Another advantage of these loans is that they are typically more flexible in terms of funding.
- Apply for the USDA Rural Business Development Program-
The USDA Rural Business Development Grant program provides technical support and training to rural firms with fewer than 50 new employees and gross sales of less than $1 million. Rural areas are defined as places with a population of 50,000 or more that are located outside the urbanized boundary of any metropolis. Funding can be utilized for several trucking-related reasons, such as a revolving loan fund for start-ups, equipment acquisition, and leadership training.
Although grant funding is utilized to help small businesses, private entities cannot seek financing directly from the USDA. Instead, municipalities, nonprofit groups, state agencies, higher education institutions, and federally recognized tribes must request funds to be allocated to local enterprises.
- Participate in the NAV small business Grant Contest
NAV is a business loan company that gives out two small business grants every quarter. The first-place winner receives $10,000, while the runner-up receives $5,000.
Once an application is complete, businesses are given a voting link to share and collect votes to be considered a finalist. NAV selects five finalists from among the 200 firms that receive the most online votes. Although the awards are restricted in quantity and funds, the application procedure is simple and the grant terms are flexible.
Other Startup Funding-
- Choose invoice factoring-
Invoice factoring provides trucking businesses with access to operating capital based on unpaid invoices. Instead of waiting for their clients to pay their bills, they may sell them to a factoring business and earn a percentage of the value immediately. This enables trucking firms to obtain the funds they require to meet expenditures and continue developing their businesses without incurring debt. The factoring firm is then in charge of collecting money from the trucking company's clients.
- Choose merchant cash advance-
Merchant cash advances give trucking and transportation firms a quick and straightforward method to get the working capital they need to expand. Rather than incurring debt, this sort of financing offers a flat sum of capital in exchange for a percentage of future credit card sales. This arrangement enables trucking firms to progressively return the advance as revenue is generated, offering a flexible and easy financial source to fulfil their operating demands.
With the above-mentioned ways, choose the best option to fund your startup or small trucking business. Use them wisely and for the intended purpose. Avoid utilizing the funds for superfluous costs, since this may have a detrimental influence on the financial health of your organization.