Experts hold that the trucking business is a profitable venture. That is because over 78% of all freight is carried by trucks. But that doesn’t mean it is all smooth in this sector. Like most industries, business owners venturing in trucking face several challenges. One of the problems worth noting is the challenge of maintaining a stable cash flow. And now more than ever, trucking company owners are looking for a way to solve this.
It is also great to note that an increasing number of entrepreneurs are investing in the industry. Yet, there is that need for every company to gain a competitive edge over the others. That is why trucking companies should be creative in marketing their business, even if it means taking a loan. Even though this is usually a risky direction, a business loan can have several benefits. Here are some details worth noting when it comes to commercial trucking financing.
How It Works
A company offering significant rig lending or semi-truck funding will usually outline how its loans work. It usually involves the business owner using the truck they invest in as collateral for the loan. Offering collateral for the lender is one way to reduce the lender’s risk when providing the loan. Providing collateral is also an avenue to improve securing a bigger loan.
In most cases, big rig lending companies offer loans for an average of five years. But this can vary depending on many factors. One of the critical factors in this aspect is an interest rate dependent on the credit score. Businesses with credit problems can secure an interest rate of around 5%. Trucking companies can also provide a personal guarantee or the types of financial statements.
The Top Consideration
When a trucking company is applying for big rig loans, it is an excellent idea to be careful. Some lending companies are not legit, and working with them can be costly. For instance, it is advisable to read reviews before settling on the loan.
Another top thing worth noting for the trucking company is to never provide any upfront payment before receiving approval. Not only that, but they should also avoid paying any application fees in cash or any other way. Big rig lending companies also recommend that borrowers make early payments to avoid being penalized.
Working with a credible lender that is experienced and reputed in offering loans for commercial trucking is essential. So, it is a great idea to read reviews and get recommendations. Doing extra and thorough research will also ensure that you get the best provider available. Nevertheless, here are some of the top benefits of getting trucking loans.
Benefits of Trucking Loan
Since financing a trucking business loan is challenging, getting a loan is the way to go. And the benefits of doing so are endless, with the following as the top ones for you.
Finance New Operations
In a trucking business, a lot is usually at stake. There is the need to hire new operators ranging from drivers to mechanics. The truth is that drivers are the most critical people in a company. Without them, you will not make the shipments on time, inconveniencing clients. So, hiring new operators, including drivers, will ensure the delivery process is a success and efficient.
But as expected, hiring new drivers is costly. Often, you will be needed to pay some fees for the recruitment agency to help with the applications. Also, you will have to pay for their insurance other fees associated with staff training and certification. These costs will also go down to pay for the uniforms and other additional equipment needed for the job.
These costs can pile up into millions of shillings. Without a business loan to back it up, you may never afford any of that. And that is where loans for your trucking company will come in handy.
Maintain Day to Day Operations
Maintaining any company beyond a trucking business comes with many financial obligations. Often, the business may face some instances of cash flow gaps because of unpaid invoices and so forth. The wait time for invoices to be paid can go for over 60 to 90 days, which means you will not have any cash to handle your daily operations.
Trucking business loans come in handy in such a situation to offer the funds needed to keep the company operational. A trucking company can also apply for invoice factoring and sell their invoice to financing companies. The business owner won’t stress following up on the payment with this.
Add More Fleet
The company will be better positioned to deliver more freight with more trucks. Companies with more fleets are more likely to get a more significant return on investment than those with a smaller fleet. No doubt that the higher the ROI, the better the chances of a company succeeding. Essentially, adding trucks to the company is essential as it allows you to cater to more clients.
But let us face it; buying more trucks can be expensive. The company will need enough money to finance the whole process. Due to this, they can always opt for assistance from lending companies to fund the new trucks.
Start-Up Costs Are Expensive
Similar to maintaining a trucking business, the start-up costs are also overwhelming. Even if a company has enough capital to start, it won’t be long before it runs out. The cost can pile up month after month from fuel, rent, office equipment, and other payable utilities. Without financing, even the most successful company could fall.
The good news is that taking a loan can eliminate all this stress. Loans will empower the company to take care of bills, invest in better technology and grow. For example, most businesses rely more on technology, unlike in the past. So, it only makes perfect sense for a trucking company to invest in this area to meet clients’ needs.
Opting for a big rig lending company service or the semi-trucks is a considerable investment worth the time and money. As a rule of thumb, always work with a reputed and reliable provider to ensure a seamless and rewarding experience.