It is lucrative to own a trucking business in the US. According to 2020 Statista data, the trucking industry was worth $732.3 billion, with owner-operators earning between $2000 – $5000 per week. However, the high startup costs, capital demands, industry competitiveness, and the additional costs required to keep trucks moving can put off many people. Here are some smart ways to finance your truck business if you want to venture into the trucking industry.
1. Bank loans
While a trucking business loan can provide you with the working capital to purchase a commercial truck, you can also explore other bank loans to address the financial challenges your small trucking business faces. However, this financing option comes with its pros and cons. For instance, some bank loans may require no cash collateral, while others may require you to make a down payment. Typically, it can be helpful if you have a good operational history on your books since some banks may evaluate your balance sheet. You also risk truck seizure when you cannot make payment, although banks rarely accept a fleet of wheeled trucks as collateral.
2. Equipment lenders
It is possible to secure funding from an equipment lender. These businesses specialize in the production and sale of trucks and related equipment. Equipment lenders provide personalized solutions and competitive financing for businesses and individuals interested in the trucking industry. However, the trucks and other financed equipment are held as collateral. Although the trucking industry can be highly fragmented, you can get venture financing to match investor equity standards. Most investors will likely be interested in your business if it is properly managed.
3. Franchise agreements
You may consider forming a franchise agreement with interested partners to help your business grow quickly. Other owner-operators operate their trucks under your name and pay a franchising fee and a share of their income under this agreement. This means you provide administrative services in the company’s running when you grant the license to the franchisee. Franchise agreements are a lucrative investment idea and can lead to lasting entrepreneurial success.
4. Online Auto lenders
Applying for a car loan from an online lender can be convenient since many offer a lower interest rate than traditional banks. Yet, car loans are not created equally, so it can be useful to weigh the pros and cons of specific online lenders to find a deal that works for you. Online car loans can be a smart way to finance your trucking business, especially in the short term, by providing competitive interest rates, convenience and speed, and various options to choose from. It can be useful to shop around, pay attention to any charges and ensure to not borrow more than you can afford. However, you can consider businesses like New Roads Auto Loans for hassle-free auto financing for your business needs.
You need a truck to start a commercial trucking business, just as you need a fleet if you want to grow your business. If your clients are not making advance payment in receiving an order, you may have to look for funding to buy a new truck and complete the job. Hopefully, these financing options should come in handy.