The COVID-19 pandemic has brought on an onslaught of economic disruptions that have impacted transportation and logistics in the United States. Lower demand, market bankruptcies, and travel restrictions have all put a strain on many companies in the transportation industry.
To remain competitive in today’s market, business owners need reliable access to working capital to keep their businesses up and running. Small business loans for transportation companies can be used for hiring drivers and office personnel, launching an ad campaign, scaling the business, or buying and leasing equipment.
There’s a lot to consider when it comes to choosing the right transportation business loan. With several financing solutions available for business owners, it’s important to know what your options are. Whether you’re a new business owner or a veteran in the industry,
Here are the 5 best types of small business loans for transportation companies:
1. Business Line of Credit
A business line of credit is a convenient way to access cash. It’s a revolving line where you can repeatedly borrow and repay without having to reapply. Here’s how it works: Lenders give you a credit limit that you can withdraw from as needed, as long as you don’t exceed the specified limit. You only need to repay the amount you’ve withdrawn, plus interest – not the entire credit line
The credit limit, the size of your loan, interest rates, and repayment terms in a business line of credit is based on your credit history and profitability. You can use the funds to repair/buy equipment, bridge seasonal cash flow gaps, or finance a marketing campaign. Since you can access the funds anytime, a business line of credit is also best for short-term expenses and immediate revenue-generating activities.
2. Equipment Financing
Transportation companies that mainly rely on trucks, ships, trailers, cranes, and other transportation equipment to operate can benefit from equipment financing. This type of financing works best for transportation companies looking to purchase or lease equipment and machinery, vehicles, and even office equipment.
Equipment financing provides you with the funds you need to purchase or lease business equipment. It’s easy to qualify for this type of financing because the equipment you are purchasing secures the loan. This means lenders can offer lower interest rates because they can sell the equipment to cover the cost in case of a default. Equipment financing is best used for expensive equipment purchases that require long-term financing.
3. Invoice Financing
B2B companies often experience gaps in cash flow due to unpaid invoices. Transportation companies are accustomed to working with clients that dictate payment terms. Net 30 to 90-day payment terms leave companies strapped for capital.
Expenses like payroll, fuel, repairs, and maintenance can quickly add up while waiting to get paid for services you’ve already rendered. With invoice financing, you’re able to get paid much sooner so you’re not stuck waiting for months at a time to receive what you’re owed.
Here’s how it works: A business owner sells pending invoices (either the entire ledger or a portion of it) to a lending company. The lender will immediately advance 80% to 90% of the total invoice value upfront, keeping the rest as collateral. Once the customers pay the invoice in full, the lenders will forward the remaining percentage (minus a small transaction fee).
The funds from invoice financing can be put towards day-to-day expenses, equipment purchases, payroll, and more.
4. Short-Term Business Loans
Short-term business loans are best used for immediate expenses. For transportation companies, this could include repair and maintenance costs, fuel, and more.
Just like a regular term loan, lenders will give you a lump sum that you’ll need to repay in fixed monthly payments within a specified period. The only difference is that you’ll be able to receive the money within days instead of weeks or months. The repayment times for short-term loans are also shorter, ranging from a few months to two years.
The funds from a short-term loan enable you to fund expenses for new projects. New routes require working capital to pay for labor, fuel, parking fees, meals, etc. before you can complete scheduled deliveries. Short-term loans are a great option because lenders can fund your business within a day or two.
5. Commercial Bridge Loans
Bridge loans for commercial property are short-term commercial real estate property that offers a manageable, alternative financing solution for businesses.
Explore Small Business Loans for Transportation Companies Today
Transportation companies need cash reserves to fund both fixed and variable expenses. With small business loans for transportation companies, you can sustain the needs of your business. If you plan to expand your fleet or refinance your working capital, you can trust these loans to provide you with the money you need.
