How Do Fleets Afford Continual Investments In Efficiency During Harsh Economic Conditions?
Fleet efficiency is crucial for achieving operational resilience, driving profitability, and maintaining a competitive advantage in the marketplace. By continuously striving for efficiency improvements, fleets can position themselves for long-term success and sustainability through down markets and up-cycles. But how do fleets afford the cost of efficiency investments when harsh economic conditions are squeezing trucking companies of all sizes?
This may sound over-simplistic, but it primarily comes down to creating improved cash flow and sourcing better access to working capital.
This is a Catch-22 situation – improved cash flow is needed to support investment in efficiencies, but improvements in efficiencies are needed to improve cash flow.
Fleets might be in a similar situation when they apply for bank financing to establish a working capital solution – the only way to qualify for a business loan is to prove to the bank that your fleet doesn’t need one.
Fortunately, both these dilemmas can be resolved by engaging alternative lenders specializing in the trucking industry. In this article, discover how industry-leading alternative lenders take a different approach than convention lenders to provide flexible business financing solutions. Learn how alternative financing options can give you the capital strength you need to afford investments in efficiencies even in a down market.
Why invest in fleet efficiencies?
During the opening months of 2023, the trucking industry suffered the steepest drop the sector has seen since the height of the COVID pandemic. Demand was down 5.4 percent in March compared to the previous year, and freight rates have taken a hammering since they peaked in early 2022. This challenging economic environment squeezes margins and threatens business stability across the sector. In the first quarter of 2023, the number of authorized interstate trucking fleets declined by almost 9,000.
Fortunately, the more efficiently a fleet operates, the more resilient it will be in the face of harsh economic conditions. By optimizing processes, maximizing equipment utilization, and improving driver habits, fleets can respond more quickly to changing market demands, customer preferences, and industry trends while maintaining a healthy bottom line.
Few will argue that investments in fleet efficiency are a good idea. The problem is – how to afford the cost of investments in efficiencies when profits are low and traditional lenders are tightening the credit market.
How to afford investments in efficiency?
During periods of harsh economic conditions when margins are razor thin, trucking companies need to stretch finances to afford investments in efficiency. Flexible business financing is a necessity.
Unfortunately, during these same periods, traditional lenders typically restrict credit as borrowers’ credit strength diminishes in line with their declining business performance levels. But there’s good news:
Alternative lenders take an entirely different approach to credit approvals. Instead of assessing credit strength, they consider the quality of assets the borrowing company owns. Fleets with aging accounts receivable from creditworthy customers and equity tied up in working equipment are well-positioned to qualify for flexible alternative business financing options.
Alternative lenders specializing in the trucking industry provide tailored financing solutions to improve cash flow and increase access to working capital. The best alternative lenders are technology-enabled with extensive resources to quickly connect trucking fleets to more money in more ways than conventional lenders can provide. With easy access to working capital, fleets can support operations through lean times, grow business when opportunities arise, and invest in efficiencies to strengthen resilience and profitability.
What financing solutions support investments in efficiency?
Each alternative lender has their version of financing solutions. Those specializing in trucking provide flexible financing options designed to provide specific features and benefits. The best financing solution for your company depends on your fleet’s business needs.
For example, if the need is improved cash flow to help cover regular costs such as TMS and ELD software subscription or licensing fees, then freight factoring might be the best option. On the other hand, if access to capital is needed to support a significant investment in EV technology, then equipment refinancing is a more effective financing solution.
The real value to fleets is the flexible nature of alternative lenders. Multiple solutions are available whether your fleet needs an easy-to-manage cash flow solution, fast cash to manage an immediate need, or a customized financing solution to overcome a complex situation.
Leading alternative lenders provide a menu of specialized products and services designed with fleets in mind:
- Fuel cards
- Visa Commercial cards
- Lines of credit
- TMS software
- Load Boards
- Cost-per-mile calculator
- Credit check tool
- Profit and loss calculator
Fleet efficiency is crucial for achieving operational resilience, driving profitability, and maintaining a competitive advantage in the marketplace. Efficiency is a company strength that needs to be planned, managed, and financed to procure equipment, acquire software, and train personnel. The cost of investments that may prevent competing carriers from pursuing advancements in efficiency can be easily managed with flexible fleet financing options provided by specialized alternative lenders.
Fleets that leverage the advantages of flexible financing options can manage cash flow more effectively, access more capital in more ways to support investments and maintain financial stability in a chaotic market. These carrier fleets can command a solid competitive advantage with operational efficiencies and cost-saving benefits that maximize resilience, agility, and profitability.
Since 2006, eCapital has been on a mission to change the way small to medium sized businesses access the funding they need to reach their goals. We know that to survive and thrive, businesses need financial flexibility to quickly respond to challenges and take advantage of opportunities, all in real time. Companies today need innovation guided by experience to unlock the potential of their assets to give better, faster access to the capital they require.
We’ve answered the call and have built a team of over 600 experts in asset evaluation, batch processing, customer support and fintech solutions. Together, we have created a funding model that features rapid approvals and processing, 24/7 access to funds and the freedom to use the money wherever and whenever it’s needed. This is the future of business funding, and it’s available today, at eCapital.