How to Take Advantage of Business Loans

By Staff Reporter Apr 06, 2020 09:40 AM EDT

All start-ups need an injection of working capital. Capital will be required to buy - or lease - office equipment such as computers, printers, phone and broadband connections, desks and chairs to mention a few examples. On top of that there may be inventory to buy, a vehicle for making deliveries to customers and racking for inventory storage. In addition, you need to constantly monitor your finances and avoid significant debt - team up with a good professional like these London insolvency practitioners. Everything mentioned here should be part of your written business plan.

Funding differentials

Different businesses require different levels of capital at the point of start up. A taxi or limousine hire business will require less capital input than, say, a freight trucking business but more than would be needed for a hairdressing and beauty salon. One thing all of those business owners will probably have in common is to whom they turn to source that funding in the first instance.

Trucking and freight

As an example, let's look at the potential funding sources for a trucking business and how best to take advantage of what is available.

Notoriously difficult to break into, the industry is fraught with risk but thousands of owner drivers succeed in the industry. Most of the trucking businesses in the United States which run multiple units and have depots across the country, as well as employ drivers and support staff, started off as a small business. In fact, some 80% of trucking companies in the United States in 2020 are small businesses, typically working a single truck or a handful of trucks.

Sourcing the right trucking business loans shouldn't be a chore, but it can be if you do not take advantage of what is on offer from funding sources other than banks. There are a considerable number of options available for start up trucking businesses. Let's look at finance options available.

Start up business loan

Such a loan can be sourced with rates as low as 0%. If you have capital funds available, it will be easier to obtain a start up loan but some lenders will even lend even if you have no monthly revenue record. Some lenders will require you to be operating for three to six months, but typically the rate of interest and the loan repayment period will be dictated by your circumstances. Also, your credit score will be taken in to account when the lender studies your loan application.

Business line of credit

Variable costs and occasional market volatility can make budgeting for a trucking business a severe headache. A line of credit offers trucking business owners borrowing flexibility. It is a safety net for the business should emergency funding be required. For example, if a customer is unable to pay their invoice, it can punch a serious dent in the day to day and short to medium term stability of the business.

Business credit card

A business credit card is a safety net which trucking companies should have at their disposal. It offers a guaranteed line of credit should the worst occur. It is also a way of paying for fuel during the month, thereby offsetting payment of the bill until the end of the month. Business credit cards are a great way of maintaining spreading the week to week costs of running a trucking business.

Sourcing an SBA Loan

The SBA is the U.S. Small Business Administration runs a scheme whereby it will guarantee up to 85% of any business loan amount. The scheme applies to the trucking industry as well. The SBA does not make the loan - rather, it does guarantee the lender will be paid but also guarantees security for the business owner.

These are just a few examples of loan and finance facilities of which trucking business owners can take advantage. If you are considering starting a trucking business, before you spend all your working capital, see what loans and lines of credit are open to you.