How to Use Trucking Business Loans to Grow Your Business
As the economy opens up, trucking companies will be bustling when people go back to their usual spending patterns. But to stay ahead in the trucking business and grow your company, you need additional financing to position yourself ahead of your competition.
What better way to secure your financing than a trucking business loan? These loans explicitly cater to trucking companies so you are bound to find something suitable for your goals!
A business loan can be a great way to grow your small trucking company. You can expand your operations and take on new contracts by borrowing money, purchasing new trucks, or hiring additional drivers. This blog post will discuss how to grow your trucking business by utilizing such loans wisely.
Best Trucking Business Financing Options
Though there are many business financing options, the most common are:
- SBA loans ( Small Business Administration Loans)
- Equipment loans
- Business lines of credit
- Business credit cards
- Merchant cash advance
- Invoice Factoring
Each financing option has its terms and conditions, so it’s best to plan ahead and review the requirements before choosing one.
How to Qualify for Trucking Business Loans
Each lender at a trucking finance company sets its specific terms for borrowers, but there are common prerequisites you need to consider, such as:
Time in Business
Because trucking businesses operate on a low-profit margin, you need to have been operating for a few years before securing financing.
Credit Score
When applying for trucking business loans, you need to remember that lenders will check your personal credit score. If your score isn’t high enough, the lender might deny you a loan. This is why it’s crucial to build and maintain a good credit history before applying for such loans.
Collateral
You might be asked to put up collateral during the approval process. This is usually in the form of property or equipment you own, but it may also be your company’s assets (even if you are still building them).
Bank Statements
When applying for a loan, you need to provide the lender with your business’s bank statements. These documents contain important data such as the amount of money you have in the bank and how much is still owed, and your expenses and revenue over a certain period (usually one month).
Income and Expenses
As a trucking business owner, you should present comprehensive income and expense information when applying for financing. This includes how much you earn, your expenditures, and profit margins.
7 Ways to Use a Trucking Business Loan to Scale Your Trucking Company
There are many options for you to utilize a trucking business loan. After carefully considering your trucking company’s goals and requirements, check out these seven ways you can use your loan to improve your business.
1. Expand Your Trucking Fleet
When it comes to investing in a trucking company, the return on investment can be higher with a large fleet.
Trucking companies that operate large fleets can save by getting better mileage rates which mean lower total costs for shipping goods from point A to B.
In addition to saving you the cost of shipping, expanding your fleet can reduce expenses related to:
- Commercial Vehicles and Semi Trucks
- Truck Trailers
- Load Boards
- Permits and Insurance
- Fuel and Tolls
If you currently have a small number of trucks, you may find yourself having to turn down jobs. If you have to turn down clients, this will hurt your company’s overall bottom line.
You can accept more jobs and increase your business revenues by expanding your fleet. Developing your fleet is essential for successfully positioning yourself in the trucking industry.
2. Hire More Truck Drivers
As your fleet grows, so does the need for more drivers. Hiring and training new employees can be costly and time-consuming. Some other expenses you need to consider when hiring more drivers:
- Commercial drivers licenses
- Permits and Insurance
- Possible union costs
- Staff uniforms and personal equipment
When expanding your trucking business, you should consider hiring a recruitment agency to find experienced drivers. You can also use reliable trucking recruitment websites or platforms to help you employ professional and skilled truck drivers.
3. Update Trucking Technology
Trucking technology is advancing rapidly and is closely related to the industry’s bottom line. As a trucking business owner, you can use your trucking loan for expenditures such as:
- Fuel management systems
- Telematics systems
- GPS tracking devices
It would help if you also considered upgrading any older parts or repairing malfunctioning pieces of equipment. If you’re still using manual processes to get your job done, you should consider investing in a bit of automation.
Purchasing new trucks that include the latest safety features and advanced technology can be costly, which is why applying for a trucking business loan such as an equipment financing loan can make such investments possible.
4. Improve Your Business Logistics
Trucking companies should also consider investing in logistics. Although managing your business’s shipping isn’t the most fun part of being a trucking company owner, it can be necessary to ensure that your company is profitable.
With improved logistics, you’ll have more control over your fleet’s performance and be able to save money on shipping.
If your company is interested in building its logistics capabilities, you may want to invest in:
- Load boards
- Truck shops and repair facilities
- Warehousing and distribution centers
- Customer care and invoicing office
5. Save on Inventory and Purchasing Costs
Because trucking companies require a lot of inventory and supplies, you should consider ways to cut operating costs by:
- Purchasing used parts and equipment
- Negotiating better prices with suppliers
Being smart about spending your money can be difficult when you own a business. Remember that every dollar you don’t spend will directly boost your bottom line. With a trucking business loan from the right lender, you can take your business up a few notches.
6. Pay Off Your Debt
You may want to use your loan to pay off debt. By improving your cash flow, you’ll be able to save money on interest expenses and fees. Your business’s debt-to-equity ratio will also improve, which can increase your company’s value.
Talking with lenders early in the process is the only one-way trucking companies can improve their cash flow. By working with a lender who specializes in trucking, you’ll be able to find the best loan for your company’s needs.
7. Increase Your Marketing Efforts
Traditional word of mouth might work in your early days, but you need to develop a marketing strategy if you want to reach more people. The right marketing efforts can also improve brand awareness and help create a following.
You’ll attract more potential customers and increase your revenues by investing in developing marketing strategies for your business. You can use your trucking loan to pay for marketing expenses so that you spend less of your own money.
Get Started With Trucking Financing
With the right trucking loan in place, you can take your business to the next level. You can hire more drivers, pay off debt, invest in trucking technology, develop marketing strategies and expand your trucking fleet, and put your company on the path to success.
Contact our lending experts at Select Funding today to learn more about how we can help you grow your successful trucking business with a loan tailored specifically for truckers. We look forward to hearing from you!
