Top 4 Transportation Business Loans for Your Growing Trucking Business

  • September 16, 2019

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Top 4 Transportation Business Loans for Your Growing Trucking Business

Did you know that 80% of all the cargo in the United States is transported via trucks? This goes to show that the trucking industry is more lucrative than ever. Newer and smaller trucking businesses often have to compete with larger companies, and in order to do so, they need reliable access to transportation business loans. 

Transportation business loans can help grow your trucking company by providing you with funds to purchase trucks and equipment, cover startup costs, and bridge cash flow gaps. Here are some of the ways you can use a transportation business loan. 

  • Purchase Spare Parts: Eventually, you may need to purchase replacement parts for your vehicles. You can use a transportation business loan to cover the costs of buying spare parts and other necessary equipment. 
  • Maintenance: Regular maintenance is needed to keep your vehicles running smoothly. A transportation business loan can be used to cover the costs of oil changes, tire changes, and other maintenance work. 
  • Cover Payroll: Aside from your vehicles, your employees are an important part of your company. Without them, no one would maintain and drive your vehicles from point A to point B. Transportation loans cover the cost of making payroll, as well as hiring more employees, and more. You don’t have to wait for your invoices to be paid before paying your employees. 
  • Taxes and License Fees: In order to run a legal business, you have to apply and pay for licensing and taxes. For example, your company drivers will need to apply for commercial driver’s licenses (CDLs) if you plan to operate heavy commercial vehicles. You’ll also need your Federal DOT and Motor Carrier Authority numbers. You can complete the entire application process through the Federal Motor Carrier Safety Administration (FMCSA). These are just some of the few licenses you need to apply for to operate a trucking business. 
  • Daily Business Expenses: With a transportation loan, you can pay for day-to-day business expenses of your business. For trucking companies, this may include paying for fuel, tolls, and more. 

Best Transportation Business Loans for Trucking Companies

If you run a growing trucking business, here are some of the best transportation companies for you. 

Invoice Financing

Invoice financing is a financing solution that allows business owners to sell their outstanding invoices to a third party company at a discount. Unlike a traditional loan, you don’t have to make daily, weekly, or monthly payments during the repayment term. 

You can sell your 30, 60, or 90-day unpaid invoices to a factoring company and they’ll pay you around 70% to 92% of the total invoice value upfront. Once your customers pay the invoices, the factoring company will send you the remaining balance, minus transaction fees. 

Short-Term Business Loans

Short-term business loans are best for trucking companies that need to finance short-term needs, such as unforeseen expenses, payroll, or taking on new contracts. Short-term loans usually have an APR of up to 50%, but the total cost is generally competitive if you can repay the loan within a year. 

For trucking companies, customers usually take months before they can pay you for your services. A short-term loan can help bridge the gap between accounts receivable and accounts payable. Immediate funding comes in handy you need upfront working capital to pay for truck and labor expenses. One of the sought-after benefits of short-term loans is that you’ll be able to receive the funds within 24 hours. You can also repay the loan as soon as you can, which lowers the total cost of the term loan. 

SBA Loans

Small business owners have a hard time qualifying for a traditional bank loan. The Small Business Administration (SBA) created loan programs to help small business owners secure financing with affordable monthly payments. The Small Business Administration guarantees up to 85% of every SBA loan. This incentivizes banks and traditional lenders to provide funding for small businesses.

There are different types of SBA loans for trucking companies. SBA 7(a) loans are the most popular SBA loan program for small business owners. With this type of financing, borrowers can receive up to $5 million, which can be used to fund almost any business purpose, such as the purchase of the real estate, land, equipment, and machinery, or even acquiring new business. 

If you need to loan less than $50,000, you might want to check out the SBA Microloans program. The average amount of money distributed through the microloan program is $13,000. You can use the funds for additional working capital, purchase supplies, or equipment and machinery. 

Business Line of Credit

A business line of credit (LOC) is one of the most flexible types of financing. It’s a revolving type of credit, which means you can borrow and repay your credit line without having to reapply. Once approved, the lenders will assign you a predetermined credit limit where you can withdraw funds from whenever you need to. Furthermore, you only have to pay for the amount of money you’ve withdrawn, plus the interest; not the entire credit line. You can use a LOC for just about anything, as long as it can benefit your business. Use the funds to pay for daily business expenses, as additional working capital, and more. 

Equipment Loan 

An equipment loan is for trucking businesses who need to purchase costly equipment (including trucks and other vehicles) but don’t have enough money to purchase it up front. Aside from new or used trucks, you can also use the funds to purchase long-term physical assets needed for your business. With an equipment loan, you don’t have to drain your savings to purchase trucks. Equipment loan lets you breakdown the cost of expensive equipment into smaller, more affordable monthly payments. 

Transportation Business Loans for You!

Trucking businesses – small-scale or large-scale – need quick access to capital in order to operate. Transportation loans can help your bridge cash flow gaps by providing you with the funding. If you want to know more about business loans, SMB Compass’ team of lending experts can help you find the best loan for you. Don’t hesitate to contact us at (888) 853-8922 or email us at info@smbcompass.com.

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