Convenient Financing Options For Trucking Companies
To ensure an uninterrupted growth, sufficient business capital is what all entrepreneurs need. Trucking company owners, like any other, are highly dependent on cash flow to make sure they don’t need to slow down, at any point, due to money restraints. However, trucking start-ups and small trucking company owners have a few options to choose from, when it comes to business financing.
Most trucking companies, initially, turn to banks for business loans. Banks lend money up front and requires the borrower to pay the amount back over time along with an interest, where the interest rate is fixed and pre-decided. Certainly, there are a few pros like lower interest rates compared to other options and chance of building business credit, but, there are multiple cons that needs to be considered as well. In case of bank loans, it is very difficult for small trucking companies to get approvals, as these traditional loans require high credit scores and credit history, elaborate and time-consuming paperwork. Besides, bank loan approvals do not come quickly, due to long old-school decision making processes. Therefore, a lot of trucking companies, these days, look out for various non-bank financing options to do away with the application hassle and ensure quick approvals and disbursements. One of the best non-bank financing options for trucking companies is Merchant Cash Advance(MCA). This financing option is great for businesses of all sizes, especially for small trucking companies or individual contractors, who do not have the resources of large commercial trucking companies, which are able to put up collateral against the loan.
Reasons why MCAs are ideal for Small Trucking Companies:
Come With Simple Application Processes, Offer Quick Approvals And Fund Disbursement
Trucking companies are often in urgent need of money, in situations where they require to add more trucks to the fleets, upscale the warehouses, commission routine maintenance, repair activities, maintain a set of competent drivers etc. Therefore, easy applications and quick approvals are quite beneficial for trucking companies.
Banks and other traditional money lenders often consider funding commercial trucking companies to be risky. Therefore, procedural delays occur, quite often. As a result, the borrowing company doesn’t get the money when they need it the most. The application process takes just a few minutes. MCAs ensure easy and quick approvals when considerable business revenues are shown. The amount hits the borrower’s business account within four to seventy two hours of the approval.
Come with Flexible Repayment Terms
Typically, Merchant Cash Advances are an advance on future receivables with a flexible and non-stringent repayment structure. The borrower are allowed to pay back the amount quickly or slowly, depending on the inflow of the revenue. In case of MCAs, one gets a chance of repaying the amount slowly, when the business is going slow and not fetching enough revenue. MCAs are considered extremely convenient, as every business owner experiences ups and downs in their entrepreneurial journeys.
Do Not Have restrictions on the Usage
One of the primary reasons MCAs are ideal for trucking companies is that the fund can be used in any kind of business operation. Be it for business expansion, marketing or covering unexpected costs like repairs, tolls or high fuel prices, MCA lenders put no restrictions on the usage.
Do not ask for Collateral
Unlike banks, MCA lenders do not require the borrower to put up collateral to get the finance approved. Therefore, MCAs are ideal for those companies which do not have significant personal or business assets. In case of MCAs, there is no risk of losing the assets even if the amount is not repaid on time.
Other popular financing options
Business Lines of Credit
The concept of business LOC is quite similar to that of a credit card. The lender sets a credit limit for the borrower, who can multiple draws, from the approved amount, as per the requirement. In case of business LOC, one needs to pay just the interests and fees on the borrowed amount. The fund can be used for various purposes, ranging from emergencies, covering regular operational costs to purchasing equipment.
Trucking companies often have multiple unpaid invoices, that eventually affect the cash flow. In such case, Invoice Factoring can be considered. Technically, it not a loan, but a financing option where a lender buys a company’s unpaid invoices at a discounted rate. Basically, the lender gets the discount for providing a fee and the borrower gets the remainder of the balance. Invoice Factoring are lenient about credit score, business history and annual revenue. Hence, it is quite easy to qualify for Invoice Factoring.
Business Credit Cards
Business Credit Cards are quite beneficial for truck businesses, when used responsibly. These offer a revolving line of credit, that can be used any time the borrower feels the need. These are extremely helpful during any unexpected crisis. The used amount needs to be repaid on a monthly basis. There are multiple benefits of using business credit cards. One can easily boost the credit score, when the timely payments are made. Also, many credit cards offer rewards that fetch the borrower points or cash back after every purchase.
Small Business Administration (SBA) Loans
These loans are backed by the government and offer multiple financing opportunities for small trucking companies, which don’t qualify for conventional business loans. SBA loans are flexible and the funds can be used for multiple business purposes. The most popular offering of the SBA is SBA 7(a) loans. With this, one can receive up to $5 million. The other commonly applied SBA loans are SBA 504, SBA Microloans and Veterans Advantage Loans.
It is a kind of funding, that is used for buying equipment. A trucking company can purchase a new or used truck, trailer or other physical assets. Here, the borrower is allowed to break down the costs of expensive equipment into smaller easily manageable payments. There are two types of equipment financing; Equipment Loans and Equipment Leases. An Equipment Loan enables one to make scheduled payments that go toward the principal balance and interest. The borrower gets the ownership of the equipment once all the payments are made. On the other hand, an Equipment Lease allows the lender to rent out equipment to the borrower, who needs to make payments every month. Once the lease is over, the borrower needs to return the equipment to the lender. In some cases, the borrower can pay the remaining balance and gain an ownership on the equipment. When it comes to Equipment Leases, monthly payable amounts are generally affordable.