Financing Options for Trucking Businesses
Working in the transportation industry as a trucking business can be expensive, especially if you are just starting out or are looking to expand. Semi-trucks and trailers are some of the most expensive pieces of equipment that you can buy, plus you will need a place to store them when not in use, and office and much more. There are four major financing options available to you as a trucking business, equipment lenders, factoring, franchising and bank loans. Knowing a little about each type can help you find the best one for your funding needs.
Equipment lenders can refer both to those companies which lease equipment and those which lend money, so you can purchase the equipment yourself. Using a variety of this type of funding can help you build a bigger company as time goes on. For example, you can use a loan to purchase your truck and then lease your forklifts from a different company. Both options give you the equipment that you need and can have favorable terms for a startup.
The transportation industry is one of those which deals with invoice billing. Meaning that you do the work now and give the customer an invoice, the client then has a term of between thirty and ninety days to pay on that invoice. This can put you in an unfavorable financial situation that a factor can help you with. A factor will use those invoices to give you an advance by either purchasing them from you or letting you use them as collateral while retaining ownership.
By reaching out to owner-operators with franchising agreements, you will be giving them an opportunity to use your name and contacts to do business in exchange for a franchising fee. This can help you market your branding better as well as help fund expansions in other areas.
Bank loans are the most traditional way of funding a company, no matter what the industry is, and so they are often the first researched and sought after. Some banking institutions are more likely to work within your industry than others and you can even find banks or credit unions geared towards the transportation community. It can be more difficult to qualify for this type of funding, but many banks are upfront about the application process and what documentation you need.
The transportation industry has some unique costs and therefore will have some unique financing options. You can find some lenders with experience working in the industry to help you get the best terms for the funding that you need.