When you are starting your own trucking business, there are many decisions both big and small that need to be made before you can haul your first load. This is the fifth in a six-part series covering the key financial considerations for starting your own trucking business.
Financial Consideration 5: Secure Financing
So far in our series on financial considerations for starting your own trucking business, we have talked about some costly items you will need before even hauling any loads such as equipment and insurance, and that’s not even including fuel and maintenance, which can really add up. So how are you going to cover all those expenses that could total up to $30,000+ if you did not just win the lottery? An excellent place to start is to explore your options to secure financing.
Bank financing might be one of the first financing options that most people think of, and it can be a good option for some but not for all. One of the biggest challenges with bank financing for new trucking businesses is their reliance on your business’s credit history and credit rating to approve your loan. They are going to ask for many financial documents to assess the risk of approving your loan and require fixed assets to use as collateral not to mention it can be a time consuming and lengthy process.
Using credit cards to fund expenses for your trucking business is one of the easiest forms of financing to acquire but can quickly add up to be the most costly. Credit cards are truly only suitable for small expenses that you can pay off each month. The benefit of using a credit card and paying it off regularly is that it is one item that can help build up your credit if you wanted to consider bank financing in the future.
Freight Bill Factoring
When you are starting your own trucking business waiting to get paid for the loads you haul and needing to cover your expenses such as fuel can be very challenging. Freight bill factoring can quickly and easily help you solve that problem because freight factoring companies provide you with the funds from your freight bills within hours of delivering the load. Freight bill factoring companies also regularly work with new trucking businesses and don’t require a lengthy credit history or outstanding credit score because they consider your brokers and shippers creditworthiness.
An equipment lease provides a few financial benefits when starting your trucking business. The biggest is it can help you secure the equipment you need without having to have all the cash up front. Most equipment leasing companies will work with you on a payment plan and loan structure that will work for you and your business so that the monthly payments will be manageable for you. It can also be an excellent form of financing for a new trucking business because the equipment will be used as the collateral to secure the loan.
These are just a few options to consider when you need to secure financing to start your own trucking business. Others to consider could be grants, and we found a fairly comprehensive list of grants on https://smallbusiness.chron.com/grants-start-trucking-company-30793.html. Additionally, the Small Business Administration (SBA) offers programs that aim to help small businesses.
Hopefully, this information on your options for securing financing when starting your own trucking business will help you choose the right financing options to grow your business. Stay tuned for part 6 of our series on fuel discounts.