How Fleets Use Alternative Financing To Support Turnaround Strategies
It’s a sign of the times – trucking company bankruptcies are on the rise as too many freight carriers, struggling to operate profitably, slide towards insolvency during a prolonged industry slump. But your fleet can avoid this trend by implementing turnaround strategies supported by a flexible financial structure.
This article takes a top-level view to look at the four stages of a turnaround strategy fleets can implement to help restore financial health. Then, a deeper dive into alternative financing explores the utilization of untapped resources to support recovery.
Learn to leverage your fleet’s strongest assets to provide the financial resources needed to support turnaround strategies and return your fleet to profitability.
The four stages of a turnaround recovery strategy
The core objective of a turnaround recovery strategy is to stop a business’s downward spiral and restore financial health. This process can be organized into the following four stages:
Stage 1. Assessment and Diagnosis: Conduct internal audits to assess operational efficiencies, identify underlying issues, and expose root causes.
Stage 2. Strategy and Planning: Develop a business plan that details changes to how you conduct your core business, records cost-saving actions, identifies new load acquisition initiatives, and defines a flexible financial plan to support restructuring.
Stage 3. Execution and Implementation: Monitor progress regularly and adjust as needed to stay on track and ensure the turnaround plan achieves its goals. This may require ongoing market analysis, regular competitive research, and continuous internal business operations monitoring.
Stage 4. Stabilization and growth: The end goal is to stabilize operations while preserving the value of the business. Now is the time to institutionalize changes in corporate culture to emphasize profitability, ROI, and return on assets employed. Build continuous management and employee development programs to raise the caliber of your human capital.
The success of a turnaround plan is dependent on the company’s ability to assess, reorganize, and revitalize operations to adjust to changing market conditions. It’s a vital process used to restore financial health. Consult with experienced turnaround consultants and financing experts to build a viable turnaround plan that’s most likely to succeed.
How to leverage untapped resources to finance a turnaround strategy?
A turnaround strategy is needed when a fleet faces insolvency that if not corrected may result in bankruptcy. Insolvency is the result of negative cash flow – more money is needed for expenses than is coming into the business. In this condition bills can’t be paid, taxes fall behind, and meeting payroll is jeopardized! The solution is to improve cash flow and gain easy access to working capital by leveraging untapped resources.
Alternative lenders that specialize in transportation have financing solutions designed specifically for these two purposes – improving cash flow and accessing more capital.
If improved cash flow is needed to bridge funding gaps, ensure that drivers and staff are paid on time, trucks are fueled and bills are paid, then freight factoring is the ideal solution.
Freight factoring converts freight bills that are due in 30 or 60 days into instant cash. It is the selling of invoice receivables at a discount in exchange for immediate payment. This simple funding process provides fast funding, reliable cash flow and back-office support. With professional accounts receivable management included at no additional charge, fleets can streamline its administration staff while improving collections.
If a large injection of cash is needed to rebalance the books, invest in technology, or scale operations to take on a new lane, then equipment refinancing would be an effective financing option.
Equipment refinancing is a specialized form of asset-based lending that converts long-term assets into cash in hand. It is used to monetize the equity tied up in your fleet’s rolling equipment to raise capital. Industry leading lenders provide:
- high valuations on equipment
- advances equalling up to 75% Net Orderly Liquidation Value (NOLV)
- few restrictions and no reporting requirements
- limited loan covenants
Your fleet’s accounts receivable and rolling equipment are the most valuable collateral assets, yet they are largely under-utilized for financing purposes. Freight factoring and equipment financing can be used separately or as combined strategies to leverage the untapped value hidden in your fleet’s strongest assets.
Qualification for these, and other alternative financing options are easy. If your fleet services creditworthy customers and has equity in roadworthy equipment, leading alternative lenders can assess your asset value quickly, approve financing, and start first funding in days.
Alternative financing provides more benefits
Speed of funding and fast, easy qualification are two of the strongest benefits of alternative funding, but there is more – more flexibility, more control of capital management, more cost saving solutions, and more tools to support profitability.
More flexibility: Financing terms designed to meet your fleet’s business needs:
- Payment schedules aligned with ability to pay.
- Expandable credit limits to keep pace with growth.
- Minimal lender oversight and loan covenants.
More capital management control: Keep control of your own finances:
- Robust online account management portal for full transparency and control.
- Account connected to Visa commercial card program for immediate access to your funds 24/7 without annual fees or interest rates.
- Pre-approved Line of credit (up to $2,500 per truck) for additional cash flow power.
More cost savings: Keep more money in your business to improve your bottom line:
- Fuel discount program accepted at thousands of fuel stations across North America for significant savings every month.
- Enhance your cash flow with credit terms on all fuel purchases.
- Cost-free accounts receivable management on freight factoring accounts.
More tools to support profitability: Convenient to use tools and software for additional operational efficiencies:
- Free credit check tool to confirm customers’ ability to pay before you haul.
- Profit and loss calculator to quickly determine profit margin on each load.
- Cost-per-mile calculator to help set profitable freight rates.
- Load board to find quality loads in real-time.
- Trucking Management Software (TMS) to control all the moving parts of your business.
The multiple benefits associated with alternative financing provides more capital in more ways with less restrictions and more control to manage your finances independent of lender oversight. This financial independence allows the capital strength to support turnaround strategies and fuel growth initiatives when new business opportunities arise.
Fleets that take proactive control by following a structured turnaround plan supported by flexible financial solutions can regain stability and return to profitability.
Work with knowledgeable professionals experienced in turnaround planning, implementation, and financing. Seek the advice of your accountant, turnaround specialists, and transportation financing specialists. Look for alternative lenders that lead innovation in fast, flexible financing designed specifically for the trucking industry. These are the lenders best equipped to support your efforts to restructure and revitalize your business to meet market conditions and return to 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.