Transportation Business Loans

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Financing for Trucking Companies

Transportation and trucking businesses are the backbones of America. The $700 billion-dollar industry is responsible for most of the overland freight in the United States. Even with the 900,000 truck drivers in the US, there is still a constant demand and shortage of drivers. Trucking companies drive the US economy, but not without a cost.

Trucking companies have high expenses to operate the business. Many use transportation and trucking business loans. Trucking business loan programs are a great way to maintain operating cash flow to keep up with the constant capital demand. Any commercial trucking company can use a transportation and trucking business loan to finance new vehicles, pay for fuel expenses, maintain payroll, and for routine maintenance on trucks and trailers.

Transportation and trucking loan programs vary based on what money is being used for. The most important thing is to make sure that you are using the right transportation loan program. For example, the best truck loan for business programs to use when purchasing a new trucking equipment financing for the transportation industry. If you are looking for capital for day-to-day operating expenses like fuel and payroll, you should be using freight factoring programs to get paid quicker on invoices.

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Is it hard to get approved for a transportation business loan?

Not at all! Qualifying for a loan through SMB Compass is simple and convenient, and you can complete it within a few minutes. Here’s how it works:

a) Fill out our online application form and enter your business information, contact details, and other necessary information.

b) After submitting your application and meeting the minimum requirements (i.e., revenue, cash flow, credit score, etc), you’ll receive several loan options. Our lending expert will walk you through this process and help you decide which loan works best for your business.

c) Choose a loan and receive the funds within 24 to 48 hours.

How much should your credit score be to get a business loan?

How can you grow your transportation business?

The first step to growing your transportation business is to secure the working capital needed to pursue opportunities that come your way. Fortunately, SMB Compass makes it easier for small business owners like you to qualify for funding.

Don’t hesitate to speak with one of our financial experts for additional information. They’re more than happy to fill you in with the details regarding business growth and financing.

How much money can you get from a transportation business loan?

How long do you have to wait before the money reaches your account?

How can you use the funds from a transportation loan?

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Loan Options for Trucking Companies

Transportation Factoring and Freight Bill Factoring

The most common form of trucking business loans in the transportation industry is freight factoring. From owner operators to large fleets, business owners are accustomed to working with large corporations and clients that dictate payment terms. Net 30 to Net 45-day payment terms leave transportation businesses strapped for cash. Weekly expenses such as fuel, payroll, and routine maintenance add up while waiting to get paid on each invoice. By utilizing invoice financing programs such as transportation factoring and freight factoring, companies can get paid sooner and not worry about operating capital. Get paid now instead of waiting 30 to 45 days!

Benefits of Invoice Factoring

Regardless of industry, the biggest benefit of invoice financing for B2B companies is cashflow. Instant payment on invoices enables companies to collect payments on Day 1 which directly impacts the day to day operating cashflow. An often-overlooked benefit is the time savings on invoice collections and billing. Factoring companies can provide ancillary services, such as billing and collections, which frees up administrative work that companies are accustomed to. The time savings directly impacts employee expenses and can improve the bottom line. The third benefit is there are no monthly principle or interest payments. Because the programs are set up as invoice advances and not loans, payments are only made when customers pay their bills. Below are some of the ways to use freight factoring.

Invoice Factoring Client Case Study

One of our clients owns a fleet of 12 trucks and has been operating for 3 years. Every year they add new trucks which come with additional expenses, such as fuel, repairs, and payroll. In order to support their growth, we provided a $250,000 factoring facility which provided them with the following benefits; 1. Payment on invoices within 24 hours 2. Operating cash flow to make weekly payroll 3. Fuel and repair discounts to reduce non-revenue generating expenses. 4. A Load Board to supplement loads and add additional revenue.

Asset-Based Loans for Freight Companies

The transportation industry is an asset heavy industry. The two main assets that all companies have are accounts receivable and trucks. Most businesses use freight factoring for ongoing cashflow and truck equipment loans for new truck purchases. However, asset-based loans are a great way to combine both. Transportation asset-based loans can be used to provide a revolving line of credit secured by both account receivables and vehicles. Asset-based lending is a great transportation loan program to have a relationship with one lender, instead of multiple ones.

Benefits of an Asset Based Loan

The main benefit of an asset-based loan is that your lending relationship is with one company, rather than having multiple lenders for equipment and receivables. Consolidating monthly payments to one lender helps companies manage cashflow and have one direct point of contact. The second benefit is that the programs act more like a traditional line of credit with an interest rate, instead of a purchase commission. Interest rates are charged on outstanding money borrowed, versus the face value of each invoice. This results in lower interest expense and more flexibility. Some of the ways to use an asset-based loan are below.

Asset Based Loan Client Case Study

Our client based out of Colorado hauls general freight within the state. They had an aging fleet and a factoring company that was charging higher than average rates. With an aging fleet and 1-3 years remaining on their equipment leases they needed a solution that would refinance their fleet and provide ongoing working capital. By using an asset-based loan we refinanced the equipment debt over 4 years, added extended warranties, and provided a revolving line of credit against the receivables of the business.

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SBA Loans for Transportation Businesses

A loans for truck drivers is the best way to get low-cost and long-term financing. SBA transportation loan programs allow companies to borrow money over a 10-year term. This results in better operating cash flow and low monthly payments for trucking companies. Sba truck loans for transportation businesses need to get loans for refinancing existing truck loans and leases. Sba truck loans and truck equipment leases are usually over 36 to 72 months. You can refinance existing trucks and purchase new ones over a 10-year term by using an SBA loan.

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Benefits of an SBA Loan

There are many benefits to utilizing SBA loan programs. The first and biggest benefit is the length of term. Traditional truck financing programs provide terms for six years, where SBA loans for trucking company financing out to 10 years. The length in term results in lower monthly repayments than traditional financing options. In addition to the term length, SBA loans can also provide permanent working capital for the business. Another significant benefit is refinancing existing loans for truck drivers and leases. There are limited ways to refinance older vehicles which is a unique benefit of an SBA loan for a trucking company. Additional ways to use an SBA transportation loan are below.

Purchase new vehicles
Refinance existing debt
Hire new employees
Improve operating cashflow
Buy out truck leases
Reduce monthly loan payments

Client Case Study

Our client, based in Ohio, is a 25-year-old trucking company with 17 trucks. 10 of the trucks were owned free and clear and the remaining had equipment financing with terms ranging from 2-5 years. To provide additional working capital and reduce the monthly debt payments we provided a 10-year SBA term loan. The result of the loan was an additional $140,000 of working capital and a monthly payment reduction of $11,000 per month.

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Bridge Loans for Trucking Companies

Short-term and bridge loans are excellent solutions for small business loans for start-up trucking companies. Businesses frequently come across opportunities that require them to act fast, which requires fast access to capital. Bridge loan programs have an easy application process and can be turned around in as quick as 24 hours. The most important thing for small business loans for start-up trucking companies to consider is the short repayment period. Bridge loans are meant to be a short-term solution for companies to fill cash flow gaps or take advantage of opportunities. The short-term nature of bridge loans has a quick repayment period so it’s important that the monthly installments are sustainable.

Bridge Loan Benefits

There are many benefits to short term loan programs. The first is the quick turnaround time. Applications have limited requirements and can be processed and funded within 24 hours. Another benefit is the flexibility it gives business owners to act quickly and take advantage of opportunity. Bridge loans can be used in a variety of different ways, but due to the short duration it’s always important to use transportation bridge loans for short-term needs.

Slow paying customers
Working capital
Emergency maintenance
Hiring new employees
Equipment down payments
Purchasing truck parts

Client Case Study

A client of ours uses bridge loans on a consistent basis to purchase used trailers. Rather than go through the equipment financing process for low-cost trailers, they utilize bridge loans for quick turnaround and short repayment. The trailers enable the company to increase revenue, earn more profit, and pay off the loan quickly.

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Business Line of Credit for Transportation Companies

The most flexible transportation loan program is a business line of credit (LOC). Lines of credit are quick to get approved for and can be used in a variety of ways. For trucking, in particular, unexpected expenses can occur. From opportunities to buy discounted equipment, to tire purchases and repairs, an LOC can be a helpful resource. There are different structures depending on the line of credit that’s used, some are secured, and others are unsecured. For a secured LOCs, the loan amounts are larger and the lower interest rates, while unsecured lines of credit are typically capped at $250,000 and have higher interest rates.

Benefits of a Business Line of Credit

The most attractive benefit of lines of credit is flexibility. Having access to capital without having to go through an application process is key to the success of many businesses. Applying for a business LOC should be proactive so that’s available when needed. Another benefit of lines of credit is the repayment structure. For unsecured lines of credit, payments are made monthly and for secured lines of credit, interest-only payments are made on a monthly basis. Next, you only pay interest on lines of credit when you use it! Rather than a lump sum, a credit line is standby capital to be used on an as-needed basis.

Here are other ways to utilize a trucking line of credit.

Emergency repairs
New equipment purchases
Operating cash flow
Standby capital
Hiring new employees
Advertising and marketing
Equipment down payments
Purchasing new parts
Fuel expense
Payroll

Business Line of Credit Case Study

One of our clients came to us with an existing factoring relationship, which worked well, but did not give them enough working capital. The factoring company gave them a 95% advance rate on receivables and as the company continued to grow, they needed additional working capital to expand their facility and hire additional employees. We used both a new factoring solution at a 98% advance rate and a line of credit to boost their cash flow and support their ongoing growth.

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Equipment Loans for Trucks and Trailers

Trucks and trailers are a big upfront cost to commercial trucking companies. A vast majority of trucking companies use truck loans and leases instead of paying cash. By using a transportation equipment loan, commercial trucking companies are able to make low monthly payments for their equipment. The two most common forms of transportation equipment loans are truck leases and truck loans. At the end of a truck lease, the equipment needs to be returned to the vendor, while at the end of a truck loan you own the equipment.

Benefits of Equipment Financing

The most important thing when operating a commercial trucking company is having cash on hand for opportunities or emergencies. A significant benefit of trucking financing for new businesses versus paying cash is the low monthly payments and the ability to keep cash reserves in your industry. Another benefit for truck finance for new businesses is the low rates associated with equipment financing. Trucks and trailers are great assets and lenders offer low rates, long terms, and large amounts for both leases and loans.

Some of the ways to use equipment loans for commercial trucking companies are below.

Purchase new trucks
Refinancing truck loans
Upgrading outdated equipment
Buy used equipment
Update equipment software
Buy used equipment

Client Case Study

One of our favorite clients is based in Wisconsin and has been growing his transportation business at 20% year over year. His growth comes with the need to constantly finance trucks and doing it quickly and efficiently. Rather than go through different vendor programs, which are based on the manufacturer, we provide a single source financing option. Within 48 hours of finding the vehicle he wants to purchase we align the financing and help get trucks on the road as quickly as possible.

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Types of Transportation Companies We Finance

Tanker Trucking Loans
Flatbed Trucking Loans
Fuel Transport and Hauling Loans
Oil Field Trucking Loans
Local Freight Trucking Loans
Long Haul Trucking Loans
LTL Trucking Loans
Refrigerated Freight Loans
TCar Hauling Loans
Interstate Trucking Loans
Intrastate Trucking Financing

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FAQ

What is a transportation business loan?

Transportation business loans allow a business to sustain the high expenses that are infamous in the trucking industry. There are different financing solutions in transportation to assist with all the upfront and overhead expenses. Equipment, labor, and fuel are very expensive and transportation financing allows businesses to manage these expenses without restraining the operating cash flow.

How do you qualify for a transportation loan?

The qualifications for a transportation loan are contingent on the certain financing a business is considering. Qualifications for a business line of credit or a bridge loan in transportation typically only include revenue and the time in business. Equipment financing is more challenging and requires that a business owner have sufficient credit, time and business, and cash flow.

How long does the application process take for a transportation loan?

The length of the application process for financing in transportation will vary depending on the type of financing. Bridge loans, lines of credit, and factoring require limited documentation and the entire application process is quick and easy. SBA loans, asset-based loans, and equipment financing typically require significant documentation and will take a longer time to complete the application process.

How would you use a transportation loan?

Transportation loans can be used in array of ways including the purchase of equipment, payroll, and repairs. It can also be used to refinance any existing debt as well as hiring new employees and growing the business. It’s common in trucking that businesses will have long payment terms. Factoring allows businesses to be paid immediately on their accounts receivable so they don’t have wait to be paid and can properly manage their cash flow.

Is collateral required for a transportation loan?

Collateral is required for a transportation loan if a business is securing longer term financing such as an SBA loan or equipment financing. If a business is securing a line of credit or a bridge loan, collateral may not be a requirement. Factoring lends money against the open accounts receivables a business has and uses that as the collateral.

What are the different transportation loan options?

There are numerous different loans and financing options utilized in the transportation industry. The most common type of financing is factoring and business lines of credit. Trucking companies can have payment terms anywhere from 15-90 days and factoring and lines of credit help bridge those payment gaps. Equipment financing is also commonly used to help finance the purchase of trucks and trailers over multiple years.