Trucking businesses have the potential to generate great returns, but they often require significant capital to begin operations. At the very least, you’ll need money to purchase or lease your truck and trailer and fuel to make deliveries. Those costs can quickly add up.
Here are some options to help finance and extend your working capital for commercial truck businesses.
Business loans and financing for trucking businesses
There are a few options for trucking business financing that you can access to help manage your cash flow.
- Equipment financing
- Equipment financing is a type of business financing for trucking companies that covers the cost of equipment for your trucking business (including vehicles and technologies) with financing secured by the value of the equipment. Securing the loan by the value of the asset means it’s less risky for lenders, which can make equipment financing easier to obtain than other types of business loans.
- Franchise agreements
- A franchise agreement allows you to expand your business by having other truck owner-operators run their trucks under your name while paying you a franchising fee and a percentage of their profits. To do so, however, you have to be willing to provide services to manage the company’s operations.
- Freight bill factoring
- Also known as invoice factoring, freight bill factoring is designed for trucking businesses. Rather than waiting for your invoices to be paid, which can take months, you sell outstanding invoices to a lender (also known as a factoring company). The factoring company collects payment from the customer. You get the remainder of that invoice, minus fees, after the customer has paid, but in the meantime, you have access to capital right away.
- Trucking business loans and grants
- There are many small business loans you may be eligible for to help you obtain the capital to start or run your business. These include small business loans for trucking companies, bank loans and small business grants.
- To learn more about how American Express can help your small business earn financing, contact an American Express Small Business Specialist today.
- Use a business credit card
- Business credit cards aren’t simply ways to purchase today what you can afford by the next billing statement: business credit cards will help build your business’ credit rating while providing expense management tools to make payments more efficient. Many business credit cards also feature rewards, which can help you purchase anything from office supplies to merchandise.
- To learn how an American Express business card can help you finance or expand your small business, browse our available business cards and apply.
Tips to boost your trucking company’s working capital
Even after you’ve started your trucking business and made the initial purchases, you’ll still have expenses, including insurance, fuel, repairs and emergencies. Cash flow in a trucking business can be challenging because there are high operational expenses, and customers can take a long time to pay their invoices. To be successful, you’ll need to have ways to boost your working capital so you have more cash to spend.
- Organize your back office
- One factor that leads to delays in getting paid is not invoicing in a timely manner. Have a policy of invoicing your customer immediately upon delivery of the load. Once the invoice is sent, follow up to ensure it was received.
- You can use an online invoicing tool to track the invoice and record when the client viewed it or you can take advantage of American Express’ corporate purchasing card, which offers assistance for supplier payments. These business solutions can even allow your vendors to pay through the platform, making life easier for both you and their team. If payment is late, the system can be set to automatically follow up with a reminder.
- Optimize for efficiency
- It might not be the most efficient for you to take care of both operating a truck and taking on administrative tasks. Determine whether it makes sense to outsource some duties such as finding the best insurance rates, scheduling your routes, creating and sending invoices, accepting payments and finding new customers. While it may cost money, it can be worthwhile for the time it saves you and the new revenue it can produce.
- Use fuel cards
- Fuel cards can be an important way to manage your trucking business finances. Some have savings when you purchase at certain locations, and you may even get fuel advances on your card. Considering that fuel is such an important and significant expense, saving money on your fuel purchases is vital to your success.
- Using small business cards that offer reward points also allow you to accrue points that can be used later as a statement credit or through redemptions for merchandise, inventory, or office supplies.
- Run credit checks on potential clients
- Unfortunately, many trucking owner-operators run into scenarios where a customer goes out of business without paying off all invoices. That can leave you owed thousands of dollars with no way to collect.
- Running credit checks on clients won’t entirely prevent that scenario but it can give you important information on potential customers, so you can avoid working with companies that have a history of not paying their invoices or don’t have the financial capacity to work with you.
Choosing financing for your trucking business
It’s important to choose the type of trucking business financing that works best for you, based on what stage your trucking business is at and how much financing you need. The above options provide you with a way to access capital to help you run your business successfully and help you manage your cash flow.
This article is intended for general informational purposes only and does not constitute legal advice or an opinion on any issue. It should not be regarded as comprehensive or a substitute for professional advice.