The Trucking Industry is a cyclical sector comprised of companies that provide shipping services, using tractor-trailers, to customers, which are usually commercial businesses. Most trucking outfits own and operate the vehicles in their fleets, though some do rely on leasing. The vast majority of revenue is generated domestically, since overseas shipments require either air- or sea-based transportation. Thus, these companies have little exposure to foreign currency fluctuations. The industry tends to be a leading indicator for the overall economy. During the early stages of an economic upswing, customers begin to ship more goods in anticipation of stronger business conditions. Conversely, a decrease in trucking demand may signal the beginning of an economic slump.
This industry is competitive. Customers have numerous operators to choose from, including privately held carriers and companies outside the industry, such as air-transporters. As a result, day-to-day operations tend to be relationship-oriented. Companies strive to build close ties with customers in order to generate repeat business. Providing excellent service is a necessity, since customers can easily find an alternative shipper. Price competition is fierce, and the companies in this group generally operate with narrow margins.
To adequately serve the needs of its customers, a trucking company has to have a large collection of tractors and trailers, often numbering in the thousands. Furthermore, the fleet has to be upgraded often (every five years for tractors). Frequent upgrades help to keep maintenance expense in check, since older vehicles require more upkeep. Also, a young fleet may attract better-qualified drivers, especially when the supply of labor is thin. Too, increasingly stringent U.S. environmental standards compel trucking companies to purchase newer, more-efficient vehicles. Fleet sizes are also often adjusted in accordance with the prevailing economic situation. During downturns, truckers will decrease the number of vehicles in operation to avoid holding excess capacity. When the supply of tractors exceeds demand, this results in less revenue generated per vehicle and other inefficiencies.
There are two primary segments within the Trucking Industry: truckload and less-than-truckload (LTL). Truckload carriers fill a trailer with large amounts of cargo from one customer, usually with a single destination in mind. LTL operators fill a trailer with small amounts of cargo from several different customers, requiring various delivery destinations. Goods shipped via LTL carriers may stop at numerous terminals and be transferred between several different vehicles before reaching the final destination. Truckload freight, on the other hand, usually remains in the same vehicle along the entire shipping route. Both types of trucking companies maintain a network of terminals and distribution centers across the country.
The industry is affected by seasonal factors. Generally, all trucking companies enjoy increased demand in the calendar fourth quarter, when retailers stock their shelves for the major holiday shopping season. In the middle of the year, LTL companies may experience high demand, relative to that of truckload operators, since there is less need to transport large amounts of homogenous freight. During the first quarter, business is usually slack for both truckload and LTL carriers – a good circumstance, since this period typically involves weather-related disruptions.
Starting or growing in the trucking industry is no small feat. You can incur tremendous expenses when purchasing the large commercial vehicles and the equipment needed to get your business up and running, or you could be drowning in expensive truck repair costs. No matter the financial situation you are facing, a loan for truckers can offer the financing, and peace of mind, your small business needs to survive the rough patches and take advantage of new opportunities.
There are several important expenses that affect the profitability of trucking companies. Labor costs have a considerable impact on earnings. Trucking companies require a deep roster of qualified drivers and freight handlers. The supply of available drivers often tends to be slim, resulting in intense competition for qualified talent. Companies need to offer competitive wages and benefits to attract the best employees. Some trucking outfits employ workers that belong to powerful labor unions. These employees possess strong negotiating leverage, and the possibility of labor strife is a risk. Nonunion workers offer lower labor costs, but they might not be as dependable. Other significant labor-related costs include pension expense and workers’ compensation.
Fuel is one other expense that must be managed carefully. Lengthy trips, heavy loads and large engines keep tractor-trailer fuel consumption high. Most of the cost of diesel fuel is passed on to customers through surcharges. But, if fuel prices rise quickly, there may be a lag in recouping all of the related outlays, thus hurting a trucker’s short-term profitability. Most companies prefer to rely on surcharges rather than long-term fuel-contract hedging.
Operating expansion and fleet improvement may be financed with cash flow, common equity and/or debt, depending on the cost of each source. At times, a heavy debt burden might be assumed in the completion of a merger that may offer greater market coverage. Generally, these companies possess average stock market risk. Over a business cycle, cash reserves can build, and barring any pressing needs for capital investment, these companies will reward investors with a big one-time dividend or stock buybacks. For the most part, though, managements are more interested in building stockholder value via operating network enhancements and expansion.
What can a loan for truckers do for my trucking business?
The trucking industry is quickly growing, meaning truckers need to have the funds on hand to help their business get established. Once truckers have a business up and running, costs related to maintenance and day-to-day expenses must also be considered. A loan for truckers can cover many of the costs related to startup and growth, such as:
- Additions to your existing fleet
- Hiring of new drivers
- Covering the numerous tolls
- Repairing or replacing tires
When should I apply for a trucking loan?
If you’re looking to expand your trucking fleet and take your trucking business to the next level, you may be wondering where you’ll get the flexible financing you need to address your working capital needs. A loan for truckers can provide the funding you need to cover all of these expenses and more. With the assistance loans for truckers provide, truckers can have the funding and the confidence they need to start and grow their business long into the future.
- Trucking Business Cash Flow Loans - Type of debt financing, generally for working capital, using the expected cash flows that a borrowing company generates as collateral for the loan. You’re essentially borrowing from cash that you expect to receive in the future by giving the lender the rights to a predetermined amount of these receivables.
- Bad Credit Trucking Business Loans - Truckers need capital to grow and strengthen their businesses, but bad credit may be holding them back. A poor credit history will nearly always result in rejection for funding, not to mention, trucking is a restricted industry for most cash flow lenders. Short-term business loans and merchant cash advances from LVRG have helped hundreds of truckers just like you, keep those "wheels a turnin!" Bad credit or not, we’re here to help your trucking business grow.
- Revenue Based Financing - Today’s trucker is constantly on the lookout for growth opportunities and must move quickly to take advantage of them. An opportunity for an acquisition or expansion can arise suddenly and needs an immediate response and immediate cash. There’s also the need to purchase new trucks, hire drivers, or pay for fuel. And of course, there will always be emergencies and cash flow gaps that need to be quickly managed with trucking business working capital. That’s why revenue based loans & cash flow loans from LVRG are the fastest growing working capital solutions among small and medium-sized trucking businesses. They’re the most prudent option for trucking business owners needing capital to fuel or accelerate their businesses’ growth.
- Working Capital Trucking Loans - At any stage of growth, fast, flexible funding is essential to the continued success of your small business. Our working capital trucking loans feature 6 to 18 month terms and fixed payment options to accommodate your specific needs, so you can focus on what you do best, running and building your business.
How can I get a loan for truckers?
Traditional lenders typically require extensive credit and financial documentation, and their approval processes are lengthy. Even if you are approved, it can take days to get your small business loan – and your opportunity could be gone by then. At LVRG, we want to help you cut through the red tape to get the trucking loan you need. Our loans for truckers are available through a fast, simple application that’s fully automated. Provide basic data, and we'll review your business performance in minutes to give you the funding you need – up to $500,000 in as fast as 24 hours.