by Chan Francesca | December 19, 2018 9:46 am
The shipping & logistics industry is a $750 billion global market, according to the latest report from the SBA. There is plenty of room to grow for entrepreneurs venturing to start a trucking business. The core requirement, however, is working capital to purchase a fleet of trucks and equipment.
Trucks also require regular maintenance to keep up and running. In this guide, we’ll show you how you can finance your operation with a transportation loan and set the right path for success.
Lets first break down the most common costs associated with running a transport company:
The biggest expense is almost always the physical trucks themselves. A tractor-trailer truck can run anywhere between $140,000 to $175,000, according to data provided by Frost & Sullivan. And that figure doesn’t factor in regular maintenance costs.
Lets get into the nitty gritty of the four best ways to fund your trucking business:
A short-term loan gives you quick access to working capital for a fixed APR. When you think of a business loan, you’re most likely referring to a term loan. You apply to a financing lender like Clarify Capitaland can get approved within 1 to 2 days. The interest rate you get for your specific loan depends on three primary factors:
Just like a consumer car loan, equipment financing allows you to get 100% of the truck’s value funded by a lender. The only collateral needed is the truck itself — exactly like a car loan. You can choose to put some money down to reduce the monthly payments or finance the complete value of the vehicle.
Most trucking business owners have invoices out to customers that are yet to be paid. Wouldn’t it be wonderful if you can get the value of those invoices instantly without any wait? Well, that’s exactly what factoring is. An alternative lender essentially “buys” the invoices at a factor rate and provide you money upfront. Since factoring is not a traditional business loan, there are no credit score requirements. Your score is not a factor at all to do invoice-based financing.
The most coveted type of financing, SBA loans usually have the lowest interest rate. The federal agency, Small Business Administration, partially backs your loan through its network of approved lenders. The main disadvantages to SBA loans are that you need to have excellent credit and go through a lengthy, paperwork-filled process to see if you can be approved. SBA loans make the most sense if you are not strapped on time and can spend several months on the process.
Source URL: https://betacash.org/how-to-fund-a-transportation-business-definitive-guide/
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