Funding a trucking business is expensive. Between the truck leases, insurance, maintenance, and government fees, costs can add up quickly. Borrowing from friends and family, or maxing out credit cards often isn’t enough to provide a business with a stable cash flow. This makes the question of how to fund your trucking company extremely important.
No matter where you are in your business cycle as an owner-operator, your trucking company could probably use more cash. Whether you realize it or not, funding options are plentiful and are built to fit all types of financial situations.
FREIGHT FACTORING: FLEXIBLE AND DEBT-FREE FUNDING
As a freight factoring company, we know invoice factoring to be a viable and convenient option to fund your trucking business. The application process is usually very simple, and oftentimes you can get set up in a day. Since factoring unlocks the cash tied up in your accounts receivable, you are able to take on as much work as you want without worrying about how to fund it. Additionally, when you factor you aren’t taking on additional debt. This makes it an attractive option for companies looking to keep their overhead low.
Businesses can rarely afford to wait months to get paid for work they have done. Most business expenses are due immediately, making a stable cash flow very important. However, while factoring is easily available, not all factoring companies are created equal. Integrity Factoring has eliminated most of the painful points commonly associated with freight factoring, such as monthly minimums and long-term contracts. By not having these, it allows you as an owner-operator to secure accounts receivable funding with minimal hassle. Integrity Freight Factoring also helps you to run your business as efficiently as possible.
For owner-operators whose first funding choice is not factoring, there are several other options for their trucking business.
TRADITIONAL BANK LOANS: BUSINESS FUNDING 101
Of course, whenever you speak about business funding, a traditional bank loan must be mentioned. When a business can qualify, these loans are usually the cheapest form of outside funding. However, the qualification process is generally the strictest of any of the types of funding listed here. Business plans, market analysis, proven revenues, and collateral may all be required in order to secure a business bank loan. Also, there may be restrictions on what the money can be used for, (banks refer to these as “covenants”). Bank loans are also generally harder for startups with no proven revenues to qualify for, making them difficult to obtain for new businesses. Luckily, banks are not the only source of traditional loan financing.
FEDERAL LOAN PROGRAMS: TAX DOLLARS HARD AT WORK
The U.S. Small Business Administration, or SBA, also provides loans for small businesses. They have District and Regional offices throughout the country that you can apply at, and they even offer what they call an “SBA Express Loan.” This loan features an accelerated turnaround time of 36 hours for a credit decision. You can secure up to $350,000 with an SBA Loan, but with this type of loan there are requirements that can make it harder to qualify. For example, you have to have been in business for at least two years, have a personal credit score of 660 or more, need at least $30,000 in funding, and have at least $50,000 in revenue over the past 12 months.
Also, if you currently serve or have retired from the military, you have additional funding options not available to anyone else. For example, the Navy Federal Credit Union (NFCU) only provides its financial services to members of the military, DoD and their families – which include 5 different types of business loans. The NFCU has competitive rates and usually has slightly lower fees than traditional banks, making them a preferred choice for traditional loan products.
NON-BANK BUSINESS LOANS: TRADITIONAL FINANCING FROM NON-TRADITIONAL SOURCES
The Internet has revolutionized many sectors of the economy, and business funding is no exception. Whereas in the past you were limited by geography when looking for funding, today you can receive offers from lenders all over the country. Non-bank business lending companies, such as Kabbage, have gained in popularity over the past decade. This explosion of options means that almost any business can receive funding in some form or another. The downside is that some of these funding options are very expensive. You can receive lines of credit from $2,000 to over a million dollars if you qualify. Some companies have qualifications that are very low; but beware, the lower the bar to receive funding, the more burdensome the terms and the more expensive it will be for your business long-term.
As an owner-operator and trucking entrepreneur, the good news is that there are many ways to fund your business. No matter your background or situation, there is a funding option to fit you. The bad news is that navigating the maze of competing requirements, costs, and restrictions can make it difficult to know which option is best for funding your business. Our advice is to sit down and determine what sort of rates, repayment terms, and collateral requirements you are comfortable with, and then research options that meet those prerequisites. The question of how to fund your business is extremely important, and it deserves careful consideration. Once you have made your educated decision in this matter, your business will be primed for success.