Introduction

A fleet of trucks is an invaluable resource, not only for the businesses that own and operate them but also for the economy at large. On the other hand, operating a fleet of trucks involves a number of expenses including advertising for CDL driver jobs, fuel, maintenance and the technology that runs the entire operation. 

Below is an overview of the different financing options available to you when investing in a new fleet or the scalability of an existing one.

Loans & Alternative Lenders

Bank Loans

In addition to addressing cash flow issues, a trucking company can use bank loans to improve the quality of its fleet. Nonetheless, banks set demanding conditions. Alongside having an impeccable operation history, the trucking business’s financial statements will be examined by the bank. 

You will also need fixed assets as collateral since most banks will not accept your fleet as adequate security. Bank loans are best suited for companies with excellent credit and who are able to patiently wait for the lengthy approval processes.  

Alternative Lenders

The majority of alternative lenders are smaller companies, which makes them more risk-averse than traditional institutions. Their rates are usually similar to the banks and are often quicker to approve requests. Although alternative lending companies offer lower amounts than conventional banks, they provide flexible terms and payment options, that fit the fleet’s unique needs better than the banks. 

Leasing

Fleet leases are agreements between a company and the fleet owner that provides access to top-of-the-line equipment for a specified period of time. Following the agreement, the company pays the owner of the fleet for its use. In addition to requiring fewer upfront payments, leasing trucks allows companies to upgrade their fleet quickly and for a small amount than buying them. 

Compared to buying vehicles, leasing a fleet can reduce costs significantly and can also include maintenance, repairs and fleet management services. If at any point in the leasing period the company decides to own the vehicle, they have the option of buying out of their leases. 

Equipment Financing

The companies involved in equipment financing are usually in the business of manufacturing and selling trucks and related items. They offer enticing financing options for trucking companies, using the vehicles as collateral for the loans. This kind of funding makes it possible to break down the long-term costs into smaller instalments. 

These funds are required to purchase assets such as new or used commercial trucks, trailers or other items required to run the business. Typically, you will make regular payments to cover the principal and interest. When all the payments are complete, the equipment’s ownership is yours. 

Invoice Factoring

An invoice factoring company will buy a business’s outstanding invoices from the owner instead of waiting for their customers to pay them. Using invoice factoring, many businesses can get access to cash without having to borrow a loan. Factoring in the freight industry is a common method used to open up cash flow. 

Freight factoring companies usually handle billing and collections, allowing truckers to concentrate on their next job. The factoring company will pay the first instalment (usually 60-70% of the total invoice amount. Once the collection has been done from the other party, the second instalment is made less the factoring company’s fees.

Franchising

The franchising business model allows the owner-operators to conduct their business with relative ease in exchange for a franchise fee and a share of their profits. This model offers a significant cost-saving benefit. Owner-operators are responsible for paying for their own fuel and maintenance bills. 

Conclusion

Whether you’re just starting your trucking business or expanding an existing one, there is a financing option available for you. Research all your options to determine of the return on investment is worth the cost of capital.