Top Ways to Finance Your Fleet
Many trucking companies experience growth and the need for additional financing simultaneously. Demand can be good and yet, with high start-up and operational costs, creative solutions to fund growth may be needed. Access to adequate financing for the purchase or leasing of new trucks and trailers is essential. There are really only two ways a company can fund vehicle purchases: cash from operations or borrowing from a bank or financial institution.
So, how do you fund progress intelligently? Let’s look at some smart ways to finance your trucking company’s growth.
- Invoice Factoring
Invoice factoring, in simple terms, is a financing solution that turns unpaid invoices into cash by selling your outstanding invoices to a factoring company. The factoring company, such as eCapital, then pays the amount due to you, minus a small percentage. You are then free to focus on operations and other responsibilities because the factoring company assumes all of your accounts receivable duties. Plus, unlike credit cards or bank loans, it doesn’t impact your credit rating.If you don’t have time for wait months for a bank loan, a factoring company can get you started right away. You can be set up and funded within a few days. From covering added fuel costs to new expenses, invoice factors can increase your capital, thereby increasing your prospects for fast growth. It’s not a loan, it’s your hard-earned money made available early. In short, factoring is a smart way to grow your business without going into debt.
Leasing has been one of the most commonly used funding mechanism for fleets, at least for those of larger size. Leasing trucks until you can afford to buy your own can be a great solution, but it depends on your funds and circumstances. One of the advantages of leasing is that it keeps bank lines open so there are still options to borrow from a line of credit if the need arises and the monthly cost of leasing is usually much lower. Some lease terms include the option to buy which can be beneficial. The downside involves the limitations associated with leasing such as the lack of collateral needed for other big purchases, mileage restrictions and chargebacks for excessive wear and tear when a lease term is up.
- Alternative Funding Solutions
Banks and similar financial entities often get nervous about lending to trucking companies without extensive past histories. For trucking companies who can’t or don’t wish to go the traditional bank route, online lending is an ideal alternative to traditional funding. Online lenders have the advantage of speed: an application takes less than an hour to complete, and a decision and the accompanying funds can be issued within days. In contrast, the traditional loan process can take weeks, or even months, to complete.
- Invoice Factoring