Key Takeouts – Beyond Truck Finance:
- Cash flow and margin are critical to ensure business sustainability
- Trade Finance is a line of credit to pay subcontractors and other suppliers
- Overdrafts support day to day operations and obligations like payroll
- Invoice finance can bring cash flow forward by allowing you to draw on your invoices early
- Invoice finance at major banks is more like an overdraft than other invoice finance providers
- There are truck finance options for start-ups
- Bad credit truck financing options need to be looked at carefully to ensure there’s a cost benefit
If you’re leading one of the many established trucking companies in Australia, you no doubt know your way around truck loans and the asset finance lenders who assist the transport industry with the trucks and trailers you need. You could even have an equipment finance master limit that gives you a revolving line of credit to help acquire and manage your assets without having to get an individual approval each time you’re funding a new vehicle. But there’s more to running a transport and logistics business than getting truck finance – you need to be able to manage cash flow, make sure subcontractors and suppliers are paid on time and deal with ATO tax debt. Beyond truck finance, in this article we’ll step out the different forms of finance for trucking companies.
Cash Flow for Trucking Companies
Cash flow is important to all businesses but trucking companies need constant positive cash flow to keep freight and people moving. Every operator in the transport industry in Australia knows the heavy cost of fuel, maintenance, tolls, licensing and insurance. With these costs and others placing pressure on margin it’s important that any business loans are designed to support your transport industry business in the best possible way.
Successful trucking companies often have some of the best processes around invoicing we see and many manage their assets movements like a skilled tactician but even experienced business owners need working capital support from time to time. These working capital solutions are designed to keep your cash flow positive.
Trade Finance to pay subcontractors to Trucking Companies
Trade Finance is a line of credit designed to facilitate trade between businesses. True trade finance is used to pay domestic suppliers and Import finance – which is another form of Trade Finance – can be used to pay overseas suppliers. While paying domestic invoices and paying subcontractors in particular is a more relevant need for most trucking companies, Import Finance can be used to fund the import of equipment and machinery that might not be available in Australia.
The features of Trade Finance are a line of credit with a pre-approved limit that is used to pay supplier invoices. Depending on your facility you might then have 90 – 210 days before paying back the trade bill. The benefit of a Trade Finance facility is it can pay for your inputs while you wait for customers to pay your invoices, which is a direct benefit to cash flow.
Overdrafts for Trucking Companies
Overdrafts are a line of credit up to a pre-approved limit that can be relied upon when you need extra working capital to manage day to day expenses. Overdrafts can be secured by property or they can be unsecured. In the case of an unsecured overdraft a security position will often be taken over the company and directors will provide personal guarantees. There is a misconception it’s only possible to have small unsecured overdrafts limits but at Dark Horse Financial we’ve successfully obtained unsecured overdraft limits over $1M for clients.
Invoice Finance for Trucking Companies
Invoice finance is a line of credit secured by your accounts receivable ledger. In practical terms this means if you’ve completed work and issued an invoice to your customer, you can claim against the value of your invoice – usually up to 80% or 85% of the invoice value. It’s important to gain advice from an expert as invoice finance providers have a large variation in fees and interest rates. There is invoice finance for trucking companies without service fees linked to turnover and with low rates that link to your accounting software making them user friendly. Invoice finance can be a high touch solution so we recommend business owners consider the service levels of an invoice finance lender and how they manage historical disputes. If you’re not sure how to gain this information we recommend you use an experienced invoice finance broker.
Truck Finance for Startups
Despite what you may have been told by your bank, truck finance for start-up trucking companies does exist and there are even rent to buy options provided you can demonstrate proof of income to make repayments. We’ve successfully obtained truck loans for start-up trucking companies using cash flow forecasts and a deposit. It’s also possible to obtain working capital for start-up businesses using private lending.
Bad Credit Truck Financing
Again, despite what you may have been told, there are bad credit truck financing solutions available. Bad credit truck loans are more expensive but if you have the work to support repayments there can often be an overall benefit. The key is to complete a cost benefit analysis to make sure you’re improving your situation by going ahead with a bad credit truck loan.
Putting It All Together – Navigating Trucking Finance
Financial stability isn’t just about the initial investment or acquiring your fleet. It’s about maintaining a continuous flow of resources, meeting day-to-day operational costs, and ensuring you can weather any financial storms. As we’ve covered, the importance of cash flow and maintaining a healthy margin cannot be understated – it is the lifeblood of a business and is pivotal to ensuring longevity and sustainability.
Trade finance is a strong tool for trucking companies, enabling you to pay subcontractors and suppliers promptly, further cementing trust and reliability in business relationships. Whereas business overdrafts play a critical role in helping you navigate routine expenses, from settling bills to meeting payroll obligations.
The right (and we stress the right) invoice finance solution can be a game-changer for many. By allowing you to draw on your invoices early, it offers a robust solution to potential cash flow gaps. But it’s crucial for trucking businesses to understand this equipment finance solution – for instance, how invoice financing at major banks differs considerably from other providers, often resembling more traditional overdrafts.
For those just starting out or those facing financial challenges, there’s still hope. The market offers truck finance solutions tailored for startups, and even if you’re struggling with bad credit.
The road to success isn’t without its bumps and turns, but with the right financial strategies and solutions, trucking companies can drive forward with confidence. To get the right finance solutions for your business talk to an expert here.
Commercial Lending Solutions For Your Business
OVERDRAFTS | TERM LOANS | UNSECURED LENDING | EQUIPMENT FINANCE | PROPERTY FINANCE | CASH FLOW LENDING | WORKING CAPITAL | BRIDGING LOANS | PRIVATE LENDING
The finance you need to do business the way you want