Turnaround Strategies for Trucking Companies: How Do They Work, and How Can You Fund Them?

eCapital Corp

Last Modified : Jan 23, 2024

Fact-checked by: Bruce Sayer

It’s a sign of the times – trucking company bankruptcies are rising as too many freight carriers, struggling to operate profitably, slide towards insolvency during a prolonged industry slump. If you find your fleet in dire straights and need to make major changes to survive, then you may need to develop and finance a turnaround strategy to avoid adding your company’s name to a growing list of bankruptcies.

This article takes a top-level view of turnaround strategies – what are they, and how you build one to help restore your fleet’s financial health. We’ve also included a deeper dive into alternative financing as an effective method of leveraging untapped resources to help fund your recovery and aid your fleet’s return to profitability.

What is a turnaround strategy in trucking?

When fleets find themselves in a negative cash flow position – that is, when more money is required for expenses than is coming into the business, you may be facing insolvency, which unchecked, often leads to bankruptcy. In this condition, bills can’t be paid, taxes fall behind, and meeting payroll is jeopardized! At this point, you need to throw hope out the window and stop waiting for something to change for the better. It’s time to take control of the situation by building a concrete plan of action, also known as a turnaround strategy, to get your business back on solid footing.

The four stages of a turnaround strategy

The core objective of a turnaround recovery strategy is to stop a business’s downward spiral and restore financial health. By taking the time to carefully assess your situation and then build and execute a strong recovery plan, you will exponentially improve your organization’s ability to weather the current storm and prepare for better roads. This process can be organized into the following four stages:

Stage 1 – Assessment and Diagnosis: While this may seem like a rather ruthless step in a turnaround plan, it is the most essential to ensure the plan’s success. If you don’t identify and make those hard decisions, someone else may do it for you. In this stage, you need to conduct internal audits to assess operational efficiencies, identify underlying issues, and expose root causes.

Stage 2 – Strategy and Planning: Once the causes of your troubles have been brought to the surface its time to build a strategy and an accompanying business plan that details changes to how you plan to conduct your core business, record cost-saving actions, identify new load acquisition initiatives, and define an achievable financial plan to support the restructuring.

Stage 3 – Execution and Implementation: Now it’s time to put your plan into action. Monitor progress regularly and adjust as needed to stay on track and ensure the turnaround plan achieves its goals. This stage may require regular competitive research to gauge how other trucking companies acquire contracts or gain market share, and continuous monitoring of internal business operations.

Stage 4 – Stabilization and growth: The end goal is to stabilize operations while preserving the value of the business. If you’ve made it this far, congratulations. But how do you avoid ever having to go through this again? Now is the time to institutionalize your changes and integrate them into your corporate culture. Given that they have contributed to your successful turnaround, they should be carefully considered going forward. For example, a greater emphasis on profitability, ROI, and return on assets employed. And finally, build continuous management and employee development programs to strengthen your in-house capabilities to avoid any future reoccurrences.

In the end, the success of a turnaround plan is dependent on the company’s ability to effectively assess, reorganize, and revitalize operations. It’s vital to restore financial health when things go drastically wrong. If you are uncertain how to build an effective plan, don’t hesitate to speak with experienced turnaround consultants and financing experts to build a viable turnaround plan that is most likely to succeed.

How to leverage untapped resources to finance a turnaround strategy?

Aside from building the plan itself, one of the toughest questions facing you in this process will be how to fund it. After all, it was likely a combination of cash flow challenges and a shortage of working capital that put you in this position in the first place. Fortunately, 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 during your turnaround to bridge funding gaps and 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 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 their administration duties while improving collections.

If a large cash injection is needed to rebalance the books, invest in technology to improve efficiency, or scale operations to take on a new profitable 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 is its most valuable collateral assets, yet they are largely under-utilized for financing. Freight factoring and equipment financing can be used separately or as combined strategies to leverage the untapped value hidden in your fleet’s most vital assets.

Qualification for these and other alternative financing options is 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 additional benefits

Speed of funding and fast, easy qualification are two of the strongest benefits of alternative financing. These qualities are key to support a successful turnaround strategy, but more is needed. The best alternative financing companies provide additional benefits that are essential to aid recovery. These benefits include improved financing flexibility, greater control of capital management, more cost-saving solutions, and extra tools to support profitability.

Improved financing flexibility: The terms of an alternative financing agreement help fleets in distress mange business financing within their means.

• Payment schedules aligned with the ability to pay.
• Expandable credit limits keep pace with growth as new business is onboarded to support recovery.
• Minimal lender oversight and loan covenants allow fleet managers more independent control of how funds are utilized.

More capital management control: Keep control of your finances even when navigating financial distress.

• A robust online account management portal provides full transparency, expense control, and security to give fleet managers better command of their business financing.
• Funding accounts can be connected to a Visa commercial card program for immediate access to your funds 24/7 without annual fees or interest rates.
• A pre-approved line of credit (up to $2,500 per truck) provides additional cash flow power.

More cost savings: Keep more money in your business. Every cent contributing to your bottom-line matter when navigating a restructuring or turnaround.

• Fuel discount program accepted at thousands of fuel stations across North America for significant savings every month. Plus, enhance your cash flow with credit terms on all fuel purchases.
• Cost-free accounts receivable management allows fleets to cut back on staff needed to chase collections.

More tools to support a return to 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 the 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) helps you better organize and control all of the moving parts of your business.

The multiple benefits associated with alternative financing provide more capital in more ways with fewer 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.

Conclusion

Fleets that take proactive control by following a structured turnaround plan supported by flexible financial solutions are much more likely to 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.

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.