The Downside to Credit Cards for Trucking Company Financing

The decision to pull out your credit card to keep your trucking company moving to pay for all types of expenses probably happens more than you would like. According to the Pepperdine Private Capital Index Report for the 3rd quarter 2017, which included responses from small trucking companies, 53% of respondents said they applied for a business credit card and 45% applied for a personal credit card to use for their business in the previous three months. Of those who applied 68% were successful in securing the business credit card, and 74% were successful at securing the personal credit card for business purposes.

One key thing to keep in mind if you are a trucking company owner-operator or small fleet owner is that credit cards can be good for certain purchases. However, using them as your sole source of financing may negatively impact your business. In fact, in many cases, credit cards can cost you more money than other options.

Fuel purchases are a very common credit card charge for many trucking companies. Credit cards can cost you more money when you use them to purchase fuel because many fuel stations charge more for fuel purchased through credit cards versus cash. An alternative, that still has the benefit of allowing you not to carry cash and have a way to easily track your spending, is by using a fuel card. Fuel cards allow the carrier to use their fuel card and still receive the cash price on fuel rather than paying a higher price with a credit card. In addition to receiving the cash price, you can save up to $.10 per gallon with no minimum fueling requirements. A few cents saved on each gallon throughout the year can add up to a ton of money. It would cost nearly $1,000 annually per truck for fuel without receiving the cash price. Luckily, fuel cards are one of the benefits of partnering with Tetra Capital for freight factoring, as we will load the funds from your freight bills directly onto a fuel card for no additional charge making it even easier to pay for your fuel with a fuel card. This will allow you to receive steep discounts on all your fuel purchases.

For trucking companies who need a line of credit and have either tried getting one from a bank and been turned down or just assume they don’t have the credit to qualify, a credit card could seem like the perfect quick solution. Unfortunately, the numerous downsides to utilizing credit cards as your source of financing can quickly outweigh the ease of acquiring them. One of the biggest downsides is that if you don’t pay them off in full every month, they typically carry with them a large interest rate when compared to various other financing options. Another consideration is that they don’t typically include any added benefits for your business, outside of maybe a small rewards type program. However, if you chose a financing option such as freight bill factoring you would receive immediate access to working capital and many additional benefits such as free credit checks on your new customers and free back office help with tasks such as invoicing, processing, postage, collecting and more. The application process to secure a freight factoring partner is a little bit longer than that of applying for a credit card but not nearly as time-consuming as applying for a bank line of credit. You can also qualify for freight bill factoring if you have little to no credit as the factoring company will take into account the creditworthiness of your clients.

It is important to look at the pluses and minuses of your different financing options to see which is best for your trucking company. Also, keep in mind that different options work better for different situations and purchases.

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About Matt Moore

Matt is an expert at helping transportation companies of all sizes grow by giving them access to the working capital they need. He has over 15 years in the financial services industry with 5 years in the transportation industry. He holds an MBA from the University of Phoenix and did his Undergraduate in Economics from the University of Utah.

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