While many industries have significant ups and downs, transportation seems to be fairly smooth.
It still can be affected by slow-downs or up-ticks in the economy. For instance, a company that cuts back on its orders will need fewer transportation services, while an increase in activity means more business.
Unfortunately, some traditional lenders only look at the possible instability and may not want to approve start-up loan requests or to expand and add more equipment. But there are some other options a transportation company can look toward for possible financing options.
- Title loans. These aren’t necessarily recommended at the consumer level but might be a useful solution for a business with multiple trucks that wants more trucks. In this case, you use an existing vehicle as collateral, and you receive the funds to buy another truck. This works well if you have the capital to pay for both loans, but a default could hurt.
- Invoice factoring. If you have money owed from customers but don’t have it yet, a financing company may loan you the difference to pay other debt until the remaining and overdue funds come in. This also could provide a nice temporary cushion to help the rest of the company maintain its current levels, such as payroll or expansion costs. But this might be difficult to budget for or to go to as a regular funding source.
- Line of credit. Rather than borrowing a specific amount, a bank or lending institution may consider approving someone for a larger amount than they can draw from occasionally as needed. Like invoice factoring, this should be used as a temporary solution and not part of your standard income.
- Working capital advances. This type of loan is based on your company’s estimated monthly revenue. This, of course, means that you’ve been up and running for several months or even years, so can be able to predict and project what a typical month could look like in normal conditions. A brand new company may not have this data available.
For more business strategies contact Integrity Financial Capital.
