The trucking business is a capital-intensive venture
Trucking companies are the pillars of America’s economy. The logistics industry is estimated to be a $700 billion industry. Trucks are responsible for moving over 71% of all American freights. There’s no doubt; transportation is a profitable business.
Nearly every part of a transportation business requires working capital at all times to achieve success. You’ll need to hire drivers and keep them paid. You’ll need to purchase new trucks and repair existing ones. You may need to hire support staff. And there’s always registrations, certifications, and other licensing paperwork that can be extremely expensive as well.
When it comes to funding your transportation business, you need a reliable partner with tons of loan options proven to help trucking companies succeed. iCapital Funding has been providing business loans to transportation companies like yours for years.
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Loan Options for Trucking Companies
No matter the industry, lenders and business owners have a mutual goal: to ensure that the company in question is profitable and healthy. That’s true whether you’re a trucking startup, a cannabis dispensary, or a yoga studio. The lender is paid back their loan, the business owner can turn profit into growth. A true win-win.
But not all loans are created equal, particularly in the trucking industry with such a wide variety of capital-intensive areas. That’s why it’s vitally important for business owners to explore the different financing options available for their goals. Ask yourself exactly what you’re trying to do with the money, and take it from there. An educated, prepared borrower is a borrower that’ll ensure that the loan is repaid in full.
Best Loans for Trucking and Transportation Businesses
The trucking business will require capital for any number of reasons. Thankfully, lenders like iCapital have any number of loans available. Consider how you’re planning to use a new loan, and work from there. Which type of loan is best suited for your business needs? Are you buying a competitor? Leasing a truck? Hiring an administrator?
For loan amounts of $50,000 for trucking companies, you may wish to consider the following options.
Short Term Loans
Short-term loans are quick loans to cover emergencies in your trucking business. They get fast approvals because they attract fewer conditions, have less stringent requirements in terms of credit score, and are best used for situations where you need cash quickly.
Every type of loan comes with its own benefits and drawbacks. For short-term loans, the benefits are obvious: you’ll have cash flow quickly, regardless of whether you’ve got bad credit. That sort of quick cash means you can cover unexpected expenses like a repair, or jump on an unexpected opportunity.
These loans do come with more difficult repayment terms. Because the repayment time is typically under two years, payments will likely be much larger and the interest rate might be high.
On the other end of the spectrum, your trucking company could benefit from an SBA Loan. The United States Small Business Administration (SBA) guarantees certain small business loans for financial institutions lending to companies in a wide variety of industries. The SBA offers COVID-19 relief loans, microloans, or, most commonly, 7(a) loans.
Whereas a short-term loan will feature higher monthly payments and interest rates to protect the lender from what could be seen as a higher-risk loan (where bad credit isn’t a factor), SBA loans are typically a more complicated application process with higher standards and far more paperwork and time investment.
Remember, these loans are guaranteed by taxpayer dollars. The SBA wants to ensure that American tax money isn’t being wasted. So if you’d like to apply for an SBA loan, you’ll need to make sure you’ve got solid credit, a great business plan, and that you’ve completed the application process in full and correctly.
Despite the complications associated with getting one, SBA loans can be used to cover many business needs, from purchasing real estate to truck financing. You can refinance your business’s debt, or hire more truck drivers. And SBA loan amounts can also be higher than you’ll see in other types of loans, as the loans are generally less risky for financial institutions due to the government guarantee. All in all, if you’re able to get through the approval process, SBA loans are a fantastic option.
Business Line of Credit
A business line of credit is a funding option that always ensures working capital is always available to your business. They function a lot like business credit cards that are held by the bank.
In a business line of credit, the borrower and the lender will agree on a particular loan limit and interest rate. The borrower then withdraws cash as needed to cover business expenses as needed. The best part? You only pay interest on the money you withdraw.
The transportation industry can throw all sorts of unexpected financial hurdles at truckers. A business line of credit is a proactive step you can take to ensure that if fuel prices skyrocket, a truck needs to be purchased, or if some other emergency pops up that requires quick cash, you’ll be ready to take advantage.
Long Term Bank Loans
A long-term bank loan functions much like an SBA loan without government backing. Without the SBA guaranteeing the financial institution, the loan is a bit riskier for the lender. You can expect a long-term bank loan to feature higher interest rates and monthly payments than a similar SBA loan. Because they’re a riskier option for lenders than SBA loans, lenders will typically want borrowers to be well-qualified with high credit scores, good personal credit, and a well-considered plan.
Equipment financing is, as its name implies, a loan specifically for equipment purchasing or leasing. Equipment loans are a type of financing very differently from some of the other previously-discussed lending options.
Equipment loans can’t be used for refinancing existing debt, hiring new employees, or any of the other expenses that small business owners often encounter in the transportation industry. Instead, they must be used specifically for equipment leasing or purchasing.
In exchange, the lender (which can be a traditional lender, an online lender, or anything in between) holds the new equipment as collateral. If the borrower should for any reason default on the equipment loan, the lender will simply repossess the new equipment. Having that possibility leads to lower interest rates for business owners.
Because the commercial truck industry is so equipment-dependent, using these loans can be a low-interest, effective financing solution for equipment purchases. They can be used to repair or upgrade existing trucks or as a down payment on a new one. Transportation financing can be complicated, but equipment loans, when used for the correct needs, are a fantastic solution.
Merchant Cash Advances
A merchant cash advance is not a loan. That’s an important factor in their effectiveness and also in their most significant drawbacks.
In a merchant cash advance, the lender will give a borrower a lump sum based on an examination of recent cash flow. Afterward, the borrower will repay the loan and interest based on a pre-determined rate, typically involving a certain percentage of each credit card transaction, processed daily or weekly.
Much like a short-term loan, merchant cash advances are fantastic options for borrowers with poor or no credit. The fact that they’re not traditional loans means that they’re not subject to many of the regulations and rules that govern other types of funding. They can be granted quickly, to nearly any business owner-operator.
On the other hand, the drawback of a merchant cash advance is that while they’ll make a large sum of cash available in the short term, the repayment coming from credit card transactions means that you’re actively reducing cash flow in the future. Lump sum quickly, but reduced income.
Merchant cash advances are also one of the higher-interest options found here, so proceed with caution. That’s not to say they’re not a fantastic option when the right situation arises. If there’s a deep inventory discount available, a merchant cash advance could be a great way to stock up on a much-needed piece of inventory. Or perhaps there’s a different emergency requiring cash immediately.
Regardless, if you’re considering a merchant cash advance, do your best to use the advance in such a way that it guarantees more and larger credit card transactions afterward. By doing so, you’re guaranteeing that the cash advance will be easier to pay back, negating their biggest downside.
Why seek trucking business loans with iCapital?
Your Credit Score Doesn’t Matter and Won’t Be Affected
Poor credit scores shouldn’t crumble your trucking empire. That’s why we approve most trucking business loans regardless of your credit rating and the decisions are made without affecting your credit profile.
Pre-Qualify and Get Approval Within Hours
Unlike other capital providers, we approve and fund businesses within four hours. Our loan application process is straightforward. It takes less than 2 minutes to fill in your details. Afterward, we review your information and provide fast financing, as quickly as four hours.
Forget about hidden charges. Our business loans come with open terms. We put everything on the table from the start, with our fast, free, and no-credit-search application process that’ll get you the business financing you need, quickly.