Regardless of the current state of the economy, people will always need a way to transport products. This is why owning a trucking company can be a very lucrative venture, given that you have access to trucking loans for business owners. In fact, more than 70% of freight in the United States is transported via trucking.
As online shopping becomes more popular over the years, the demand for shipping has also increased. Studies show that 63% of online shoppers want their items to be delivered within three days. Additionally, 85% of the buyers are willing to pay a premium for faster shipping.
However, profit margins for trucking companies are tight. On average, for every dollar made by a trucking company, they only earn $0.05 in profit. Since customers only pay after the job is done, trucking companies may sometimes eat into their profits to pay for daily expenses.
To protect your earnings, you might want to consider applying for trucking business loans. Here are some most popular loan options for trucking companies.
1. SBA Loans
The Small Business Administration (SBA) knows how hard it is for small business owners to access bank-rate financing. They created the SBA loans – loan programs guaranteed by the Small Business Administration. By securing up to 85% of the loan, the SBA encourages lenders to loan lend money to borrowers. The SBA covers 85% of the loan if the borrower defaults, lowering the risk for lenders. However, SBA loan applications are stringent. You need to provide certain documents and have a high credit rating to qualify for one.
2. Equipment Loans
As the name suggests, an equipment loan is used to buy equipment. For trucking companies, you can use the loan to purchase new or used trucks, trailers, and other equipment and machinery necessary for the growth of your company. With equipment loans, you don’t have to purchase the equipment you need out of pocket. Equipment loans break down the cost of the equipment into smaller, manageable payments.
The terms and rates for equipment loans depend on different factors, such as the lender you’re working with, your creditworthiness, and the amount of the loan. More qualified buyers are charged lower interest rates, while applicants with lower credit ratings are charged higher.
3. Business Lines of Credit
If you have a credit card, then you know how business lines of credit work. Lenders set a predetermined credit limit where borrowers can withdraw from multiple times as needed as long as they don’t go over the limit. You can use the funds for any business expenses, from day-to-day operations to purchasing equipment, and unexpected emergencies.
With a business line of credit, you only have to pay interest and fees on the amount of money you’ve withdrawn. For instance, if you have a credit line of $20,000 but you’ve only withdrawn $5,000, you only have to pay for the $5,000. The rates vary from lender to lender and the more creditworthy you are, the better the rates.
4. Short-Term Business Loans
Short-term business loans are term loans with short repayment periods. The repayment period usually varies within three to six months, but it won’t exceed a year. Short-term loans offer fast funding, ideal for unexpected expenses. However, the convenience of a short-term loan comes at a price. It’s one of the most expensive forms of loans, so make sure to use it only when necessary.
Short-term loans are also ideal for borrowers who couldn’t qualify for traditional loans because of low credit ratings, lack of collateral, etc. However, make sure to calculate the return on investment to determine whether the short-term loan is worth it or not.
5. Invoice Financing
Invoice financing lets trucking companies leverage their invoices in exchange for instant working capital. You sell your outstanding invoices to a factoring company at a discount rather than waiting for 30, 60, to 90 days for customers to pay their invoices. You’ll receive up 90% of the total invoice value upfront. Your customer will pay their invoices directly to the invoice factoring company. The factoring company will then forward the remaining balance minus a small transaction fee. Every time the invoice goes unpaid, the factoring company usually charges a fee (1% to 2% of the invoice value).
Fund Your Business with Trucking Loans for Business Owners
Trucking companies need working capital to run their business efficiently. With trucking loans for business owners, you’ll be able to fill cash flow gaps and pay for operating expenses.