How Fleets Can Pay Bills and Keep Trucking While The Industry Rebalances

eCapital Corp

Last Modified : Jan 16, 2024

Fact-checked by: Bruce Sayer

Amongst all the uncertainty clouding the freight market, one thing is for certain – your fleet’s costs and bills are likely far higher than they were in 2022!

Progressive interest rate hikes since March 2022 have driven up the cost of loans, equipment, and facility financing. And challenges associated with higher fuel, tires, and other over the road expenses are compounded by rising wages, increased insurance costs and supply chain disruptions. Declining demand for freight and low freight rates are adding to the mix and reducing profit margins to a razor-thin level – some fleets are running at a loss!

But, for savvy fleet managers, there’s still a way forward, as most trucking fleets have untapped resources that can help pay bills and maintain operations while the industry rebalances.

In this article, you’ll learn why alternative financing is becoming the preferred solution for transportation fleets seeking maximum access to working capital to pay bills and keep trucking during difficult market conditions.

The preferred financial solution for trucking fleets

One of the leading reasons trucking fleets fail is a lack of sufficient funds to operate the business through extended valleys of the freight industry market cycle.

Conventional lenders, such as banks, can be very unsympathetic to the hardships trucking fleets encounter as they navigate the extreme lows of market demand. These lenders base financing decisions on the credit strength of the borrowers’ business. As a result, weakening business performance levels become red flags that alert conventional lenders to increasing risks of loan default. In response, banks typically increase oversight by monitoring loan covenants closely, and this can result in a restriction of credit or a loan recall for underperforming fleet operations.

Alternative lenders can help you avoid many of these financial stresses by taking a different approach to lending decisions. Rather than assess the borrower’s credit strength, they consider the quality of the business’s assets to be used as collateral. This difference can provide a significant advantage for trucking companies. Fleets with regular invoice receivables from creditworthy customers and equity in working equipment are well-positioned to qualify quickly and easily for alternative business financing.

Leading alternative lenders specializing in the trucking industry are often able to provide tailored business financing solutions to address fleet challenges. As a result, a growing number of fleet managers favor their benefits and regard alternative financing as the preferred funding solution.

What are the benefits of alternative financing for fleets?

The main benefits of alternative financing for fleets include fast funding with easy access to more capital than conventional lenders are willing to provide, and they can deliver it in more ways. When backed with the financial strength of flexible funding options, fleets can more efficiently manage their expenses and pay their bills, keeping their trucks on the road and hauling freight.

Here’s a breakdown of how tailored alternative financing solutions designed specifically for the trucking industry can provide significant benefits to busy fleet managers.

Easier qualification requirements: Qualification for alternative financing is much simpler than applying for a traditional bank loan. This is a huge benefit for fleets with underperforming business levels. Credit decisions are based on the quality of assets and the creditworthiness of the client’s customers, not on the borrowers personal or company worth. As a result, fleets that may be deemed unbankable by the traditional banking system may still qualify for reliable funding from a lender who acts more as a trusted financial partner than a debt collector.

Faster approval process: Traditional lending institutions are notorious for having long approval processes – alternative lenders can approve an application within days and begin first funding immediately. With the support of an alternative lender, fleets with payroll burdens, mounting fuel bills, urgent repair costs, and pressing overhead expenses can quickly settle accounts payables and maintain regular on-time payments to suppliers.

Easy to manage accounts: Alternative lenders have minimal reporting requirements, few covenants, and provide robust online account management systems to easily control account activity. Fleet managers benefit from receiving the financial resources they need to support operations without spending their day reporting to the lender or monitoring financial statements to ensure compliance with loan covenants.

Trucking experience: The best transportation-focused alternative finance companies have a deep knowledge of the industry and understand how transportation businesses operate. You’ll benefit from having a lender with the expertise and resources to be solution focused when facing financial challenges. These lenders are forward thinking and are best suited to create innovative solutions that can keep your fleet operational through the many challenges of a volatile industry.

Alternative financing strategies for fleets

Leveraging the benefits of alternative financing, trucking fleets can create effective strategies to pay bills and keep trucking.

Here are three financing strategies resilient transportation fleets utilize to ensure access to the capital needed to maintain operations, respond efficiently to changing customer needs, and capitalize on growth opportunities:

1. Unlock capital tied up in equipment!

Most trucking fleets have a significant asset pool few lenders even recognize: Your working equipment. Fortunately, leading alternative lenders that specialize in transportation financing recognize the value that may be tied up in this valuable resource.

Equipment refinancing is used to monetize the equity tied up in your rolling equipment. This specialized form of asset-based lending releases a significant injection of cash to consolidate debt, acquire new equipment, or support a turnaround scenario.

Truck fleets in all stages of their life cycle are choosing equipment refinancing as a solution to stabilize finances. Following is a top-level overview of its many advantages:

• Your working equipment becomes your collateral security
• Provides fast access to large cash reserves
• Offers flexible terms and repayment schedules
• Includes few loan covenants
• Regular borrowing base monitoring is not required

2. Leverage your outstanding invoices to improve cash flow

Freight factoring is a mainstream financial option trucking companies utilize to improve cash flow and ensure reliable funding. As fleets deliver loads nationwide, invoices are submitted and paid within hours, sometimes immediately depending on the lender you choose as your financial partner. With improved cash flow, fleets are more resilient and agile, and able to maintain efficient operations despite harsh market conditions.

3. Layer in additional products to help your business work better

Leading alternative finance companies can help you maintain resilience in the face of harsh economic conditions by combining innovative funding solutions with additional resources to help maximize efficiencies.

The following is a list of additional resources that you may be able to access with your alternative lender to help you run a better business:

• Visa Commercial cards
• Lines of credit
• Fuel cards
• Load Boards
• TMS software
• Cost-per-mile calculator
• Credit check tool
• Profit and loss calculator

Conclusion

During tough times, trucking company owners are forced to make difficult decisions to keep the bills paid and keep trucks on the road. Alternative finance options alleviate this stress by providing quick access to the capital needed to weather market uncertainty, keep up with rising costs, and stabilize finances.

Vulnerable trucking companies have been dropping out of the market at a rapid pace since the bust of the spot market bubble. As the freight industry rebalances, stable fleets with better access to working capital will gain a competitive advantage as they are able to respond more effectively to new business opportunities.

Use alternative financing to maintain the financial strength needed to pay bills and keep trucking during harsh economic conditions.

eCapital Corp

eCapital Corp. is committed to supporting small and middle-market companies in the United States, Canada, and the UK by accelerating their access to capital through financial solutions like invoice factoring, factoring lines of credit, asset-based lending and equipment refinancing. Headquartered in Miami, Florida, eCapital is an innovative leader in providing flexible, customized cash flow to businesses. For more information about eCapital, visit eCapital.com.