You know you’ve got to keep your business moving. But without funding, you can struggle to meet your business plan: keeping trucks on the road, hiring and retaining staff, and growing your business.
And if you don’t have enough working capital on hand to deal with unexpected issues – like a vehicle that needs repairs, or a sudden increased demand for your services – your business can end up stalled on the side of the road.
So, think about funding when you’re reviewing your quarterly earnings, or planning for the future. Your options include applying for a traditional bank loan and accessing funding from an alternative lender.
How can I use funding to build my trucking business?
The terms of the funding you secure from a bank may limit what you can do with the funds you borrow. With an alternative funder, you get more options. You could use the funds to:
• Leverage new opportunities
• Cover business expenses
• Lease or purchase vehicles
• Purchase or upgrade tools and machinery
• Repair or replace vehicles and other essentials
• Expand staff
• Extend services you offer
• Add a new location, or increase current office space
• Invest in technology
• Market your business
Applying for a bank loan for your trucking company
Getting all the paperwork together a bank loan is a complicated undertaking. You can expect to spend at least 25 hours on paperwork for bank loans and you will likely need to apply at several banks during the application process. You’ll need to fill out a lot of forms, present an extensive business plan, tax records and other supporting documentation.
All of this effort would be fine if you knew that all that work and time is likely to pay off in the end. But the approval percentage for small business loan applicants recently hit what is described as a “record high” of 27.3% at big banks. It’s great that approvals are increasing, but that record high means that only about one-quarter of all applicants are getting funded.
If you have been in business for several years you many qualify for an SBA loan. These loans are issued by banks, but the Small Business Administration guarantees to pay back the majority of the loan amount if you default. This reduces the risk for banks, but the SBA takes on the risk. While there is no hard requirement for you to have a 700+ credit limit for an SBA 7(a) loan (the type of loan most trucking businesses prefer) you are unlikely to be approved without at least a score of 650 - and 700 is preferred. You’ll also want to have an annual revenue of at least $100,000 and a solid track record of building your business to apply for an SBA 7(a) loan.
Even if your loan is approved, you’ll likely wait weeks or, in some cases, a month or more for the funds to actually be available for use. So, consider alternative funding sources if you have neither the time, patience or credit record that will enable you to secure a traditional business loan for your construction business.
Alternative Funding for Trucking Businesses
Alternative lenders welcome businesses that have revenues as low as $5000 a month, and once approved the funds are typically available within 72 hours. Business owners don’t need to have perfect credit scores to be approved. And the typical application process takes minutes, not months.
Alternative small business funding typically offers options – such as equipment loans and invoice factoring – that are designed to meet the needs of smaller businesses. That’s one of the reasons that alternative funders may say that they do not offer “loans.” Some of the funding options that they make available to small businesses are actually advances on future revues and unpaid invoices. This flexibility enables people with less than perfect credit to access business funding more easily – the funders aren’t interested in your credit history, they are focused on how your business is doing now.
The types of funding available through alternative sources may include:
You may be able to get up to 100% of the value of your business equipment, such as vehicles or machinery. The equipment/machinery serves as the collateral for the funding, making this an option that may met the needs of business owners who have substantial equipment assets but will low or no credit ratings.
When business is slow, unpaid invoices can cause significant cash flow problems. Invoice financing provides expedited access to your funds. You get an advance on a portion of the funds due, the funder later collects the full invoice amount, plus fees and interest. This is a great option if you have reliable customers who are just a little slow on paying their invoices.
Merchant Cash Advances (MCA):
these are paid back via a percentage of the business’ daily or weekly sales. It’s an obvious choice for businesses that have daily or weekly transactions,such as restaurants or shops. But other types of businesses can use MCAs too. If your trucking business has steady weekly revenues which are paid into business bank account, this is an option you may want to discuss with a funding expert. Funders look at a business’ receipts to determine whether to approve the advance, so small business owners with low credit ratings are often able to get approved for an MCA.
How to Apply
Requirements vary according to the type of loan, and the amount. One easy way to get started is by getting pre-approved by One Park Financial, which then gives you access to a funding expert who can discuss your business needs and options to determine what funding types best meet your needs.
One Park Financial works to help owners of small and mid-sized businesses access the funding that meets their needs. Established in 2010 and founded by entrepreneurs, One Park Financial understands the challenges associated with small business loans and their need for working capital. Visit oneparkfinancial.com or call 855.218.8819 and connect with a funding expert to discover the options that make sense for you and your business.