Why would I need a trucking business loan?
Getting started in the trucking business can be challenging financially, but once you are up and running it is one of the most accessible ways to become your own boss and make sure that you take in all the profit from your hard work, instead of having to see percentages of it go toward managers, supervisors and the people who own the truck that you drive. When you take over more and more of your own trucking equity, though, you also take on more and more of the risk associated with driving huge vehicles all over the country, including maintaining your truck and acquiring new vehicles as you have the opportunity.
What could financing a trucking business pay for?
When you started out as an OTR driver, you likely brought in a certain amount of money per mile. You knew early on that you wanted to get more and more of that pie, so you saved aggressively until you had the money to buy your own setup. Now you’re reaching out to clients and hauling their freight, making more money, even after you factor in for maintenance and depreciation on your truck.
However, you’re ready to start expanding your business beyond the truck that you drive around the country. You even envision a time when you don’t have to be the one braving the vast expanses of Canada in a truck, far from home and family, just to bring in money. You want to add a second truck to your business and find someone who is now where you started out – holding a license to drive the big trucks and looking for ways to start building an income.
Then you realize that you need a little more money that you have set aside to get that second truck – or you think to yourself that getting two trucks at once gives you a chance to build your profits even faster. So you do some research on startup business loans for trucking, and you head down to your local bank to see what they can offer you. You’ve been driving your own truck for almost a year, building business and piling up the savings.
But when you go in and talk to the same bank that has had your checking and savings accounts – both personal and business – you find that small business loans for trucking companies take a lot of paperwork. They want to know your credit score, and they want independent verification of your income receipts from the driving you’ve been doing. You turn all of this in, as well as your bank statements (both personal and business), and they hem and haw around, and a week or so later they say that you’re not quite where you need to be to qualify for that loan.
You figure that since this is “your” bank, you’re not going to get any better answers from anyone else, so you decide to stick it out for another year or two with your single truck and save enough to buy that second truck in cash, and you hope that you can do the same thing to get that third (and maybe fourth) truck down the road.
Can’t find a trucking business loan? Consider a merchant cash advance
Before you give up on your dreams of expansion (or push them down the road a year or more), consider the advantages that a merchant cash advance could bring you. While your credit score does play a part in the decision about your advance as well (particularly the amount and the factor rate), what the provider looks at even more are your credit and debit card receipts and your sales trends over time. The reason for this is that it is your sales that will be your collateral – and your repayments will come right out of your receipts.
How does it work?
At Best Bridge Capital, we work with a network of funders & lenders that are all looking to provide cash advances to small business owners – we help restaurant owners, florists, dentists, auto repair business owners and people from just about every sector, including the trucking industry. Once we take your information, we review your information to find the best fit, and then we come back to you with proposals to consider.
Then the next step is up to you. You review the offers and decide which approval amount, factor rate and repayment rate work best for you. The factor rate dictates how much you have to pay back, and the repayment rate indicates how much of your daily (or weekly, in some cases) receipts will go to your advance provider directly and work on paying down your total balance.
Here’s an example. Let’s say that you get approval for a $150,000 advance at a factor rate of 1.3, with a repayment percentage of 20%. So when you sign the paperwork, you’ll get that $150,000 and then owe the provider $195,000 ($150,000 x 1.3). Every day, 20% of your eligible receipts will go directly to the provider, until that $195,000 is paid in full.
An alternative option of funding for $160,000 is provided, with a factor rate of 1.15 (most providers use a factor rate between 1.15 and 1.45). You would pay back $184,000, and the repayment percentage rate would be 15%. This is by far the better deal – you get more money up front, you have to pay back less over time, and you pay less out of your pocket every business day. So the second offer is definitely the one that you would take.
How do the providers set the repayment percentage and the approval amount?
They take a look at what you bring in each month and use that to determine how much you would be able to pay back out of your receipts. Then they figure out how much you would have to pay in order to settle the debt within nine to twelve months. If you ask for a lower repayment percentage, then you may find that the approval amount drops a little bit in compensation. Remember, they use a formula that ideally brings them all of their money back in a little less than a year.
If you’ve been looking for a way to expand your trucking business but haven’t gotten the answer you wanted from your bank, a cash advance could be the difference maker for you. You don’t face a new set of fixed installment payments, and you won’t face an approval process that can take as long as a month even if things go according to plan. If the worst happens and you have to close your trucking business, you won’t find that advance following you. It is tied to your business receipts, and if those go away, you have no other liability for the loan.
Curious to learn more about how a cash advance could
help your trucking business?
Get in touch with for a merchant cash advance with BBC today. This sector was entered to help entrepreneurs turn their dreams into reality, and we look forward to helping you. Give us a call or email, and let’s start turning visions into reality, so that you can replace those long miles behind the wheel with big revenues coming from your expanded business operations. Your family will definitely appreciate seeing more of you.