The Benefits of a Short Term Loan for Trucking Companies - National Business Capital

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The Benefits of a Short Term Loan for Trucking Companies

Trucking and transportation companies are the backbone of the U.S. economy. Yet, with so many expenses to manage, it’s difficult for these businesses to get off the ground and remain profitable, especially with the fluctuating costs of fuel and materials we’ve seen over the last two years. It’s an uphill battle, but there’s one key resource that entrepreneurs in this industry have available to help them stay ahead of their cash flow—short-term loans.

Short-term loans are exactly what you’d expect: A financing solution that’s designed to be repaid over a short period of time. Entrepreneurs typically leverage these types of loans to get through a specific challenge or to take advantage of an opportunity, whereas longer-term loans are more suited for expenditures that will take more than one year to complete. Each of these repayment schedules are advantageous for specific circumstances and industries, but for trucking companies, the benefits of short-term financing are seemingly endless.

You can use the funds from a short-term loan for almost any business purpose, including operational expenses, team expansions, special projects, and more. If you’re a trucking company looking to take a leap ahead of its competition, here’s everything you need to know about short-term loans and, more importantly, how to leverage your financing to support your growth

What Are Short-Term Loans?

Short-term loans are financial products that provide quick access to funds for businesses in need of a short-term financial boost. These types of loans can be used to bridge temporary cash flow gaps, obtain necessary equipment, pay taxes, or even renovate your property. For trucking companies, they can help you manage fuel costs, repair expenses, equipment purchases, and more.

Short-term loans typically do not require collateral and have flexible repayment periods, allowing borrowers to repay them on a schedule that works for them. They generally offer competitive interest rates and can be obtained quickly compared to other loan options.

How Can a Trucking Company Use a Short-Term Loan?

The fluctuating cost of fuel, materials, and vehicle parts has created a difficult situation for entrepreneurs looking to stay competitive. Your supplier could offer a certain price one week, then that price is double the amount in the next week, forcing you to stay vigilant on a consistent basis to ensure you aren’t spending more than you have to. It’s something that the entire industry is dealing with as a whole, but it becomes much more challenging if you experience cash flow constraints that limit your ability to purchase the fuel, materials, and equipment you need to operate your business.

An inflated expense can limit your ability to operate at your highest capacity. But, with a business loan, you can secure an influx of cash to help you solve your challenges or afford an opportunity for growth, even while your cash flow is locked up. Here are a few ways that trucking companies can leverage short-term loans to support them as they grow:

  • Cover fuel costs when prices rise
  • Purchase trucks and other equipment
  • Take advantage of bulk supplier discounts
  • Hire additional team members
  • Bridge gaps between customer payments
  • Expand your physical location
  • Launch a website
  • Start a new marketing campaign

Keep in mind that short-term loans come with expedited repayment schedules. While this does help save money on interest, it can overwhelm your organization if mismanaged. There are significant consequences associated with late payments or a total default, so you should carefully evaluate your finances to ensure you’re able to repay the borrowed funds by the deadline.

What Are the Benefits of a Short Term Loan for Trucking Companies?

A short-term loan can provide the necessary funds for trucking companies to invest in repairs or upgrades without having to wait for the money to come from their regular income sources. In other words, they provide fast access to cash that can be used for a variety of purposes, including paying for fuel, insurance, repairs, maintenance, or other unforeseen expenses.

This type of financing reduces stress for both business owners and their drivers because it provides a quick solution that helps keep trucks running and customers satisfied. Short-term loans can also be used as bridge funding when purchasing new equipment or vehicles, helping small trucking companies access extra cash flow and increase their operations at a faster rate. This can lead to improved profits in the long run, which is beneficial for any company.

However, remember that the benefits of your short-term loan depend on the lender you’re dealing with and the terms you’ve agreed to. Just because you were approved for a loan doesn’t mean that the offered terms fit your goals or the needs of your business; It just means that you met the qualifications and can move forward if you’d like. There are thousands of nightmares where entrepreneurs have locked themselves into contracts that do more harm than good, so make sure to carefully review your approvals with your business’s best interest in mind.

What Types of Short-Term Loans Are Available to Trucking Companies?

Short-term loans come in many different formats, with some being more flexible than their counterparts. Here are a few of the most common short-term loans leveraged by entrepreneurs in the trucking industry:

Term Loans

A term loan provides funds in a one-time lump sum payment that you manage over time. You’ll repay the borrowed amount within the terms outlined by your lender, alongside interest payments that are factored into your total repayment. Term loans are best for situations where you know the exact cost of a project or expense.

Business Line of Credit

A business line of credit is one of the most flexible short-term financing options available to those in the trucking industry. Unlike a term loan, where funds are provided in a lump sum, you’re able to draw capital from your line of credit on an as-needed basis. Once you repay the borrowed amount, you can take the same funds again, which allows you to have funds on hand for any challenge or opportunity that comes your way. A line of credit is best for projects where you don’t know the final cost and for any entrepreneur that wants to have an emergency fund on hand.

Equipment Financing

Equipment financing allows you to break down a sizeable asset purchase into a more manageable schedule. If you need to add a new truck to your balance sheet, repair a damaged vehicle, or strengthen your organization with a new CRM, equipment financing can help you reach your goals.

Revenue-Based Financing

Late payments or slow-paying customers can seriously affect your cash flow. With revenue-based financing, you can leverage your future payments for cash in the short term, allowing you to continue operating at full capacity. This type of financing is beneficial for almost any opportunity or challenge, but make sure that the terms you agree to fit your business and goals before signing on the dotted line.

What Are the Interest Rates on Short-Term Loans?

Lenders determine interest rates based on the type of financing you’re seeking, the amount you want to borrow, the repayment schedule you’ve requested, and the financial information of your business, amongst other things. All of these factors combine to form your interest rate.

Let’s break down the factors that influence your interest rate.

Type of Financing

The type of loan you’re seeking to borrow will influence the interest rate you pay. For example, equipment financing agreements generally have higher interest rates than term loans, with SBA loans having some of the lowest interest rates on the market.

Amount to Borrow

Your interest rate will vary depending on the amount you’re seeking to borrow. Lower amounts will generally have lower interest rates because the lender is taking on less of a risk by financing your business.

Repayment Schedule

Longer repayment periods will carry higher interest rates because of the risk imposed on the lender. Even if your interest rate is higher for a short-term loan, you pay less interest because of the abridged schedule, compared to longer-term financing.

Financial Information

Your revenue, credit score, and time in business all come into play when determining your interest rate. If you can display a high credit score, substantial annual revenue, and a lengthy time in business, your interest rate will be lower than a business without these qualifications.

 

Any lender offering to finance a business is taking on a risk of default, regardless of the profitability and financial security of the said business. Anything can happen during the repayment that causes the recipient to default on the payments, so lenders impose interest rates as a way of protecting themselves against a sudden default or loss of funds. If you’re having trouble securing an interest rate that fits your business, consider speaking with the expert Business Finance Advisors at National.

Streamline Your Search for Short-Term Loans With National Business Capital

Searching for the right lender isn’t something most entrepreneurs have time for. You’re busy running your business, so how can you take yourself away and put effort into your research? At National, we understand this very well, so we’ve created a time-saving machine for entrepreneurs that can move you from application to funding as fast as possible. 

Our expert Business Finance Advisors leverage a 75+ lender marketplace to connect our clients with the right lender for their specific needs. You receive multiple competitive offers with one application, which eliminates the time you’d have to spend completing each lender’s application and waiting for decisions. Our team works with you every step of the way, and if you aren’t happy with the offers we’ve received, we can go back to the drawing board until you’ve received an offer that fits your business, not just your budget.

We’ve secured more than $2 billion through 25,000+ transactions, with 2,100 5-star reviews on Trustpilot to back up our claims. No one can match National’s speed, simplicity, and professionalism—you can count on it.

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FAQs

Why Would a Business Use a Short-Term Loan?

Businesses leverage short-term loans for short-term challenges and opportunities. The abridged repayment schedule is best fit for businesses that are capable of repaying the borrowed amount within a year or less of the start date, where the funds come from either regular profit sources or from the source of their opportunity. For example, a business that can secure a supplier discount by purchasing inventory in bulk might benefit from a short-term loan, but only if the discount will yield revenue that outweighs the cost of borrowing or they have enough income to cover the cost of their financing.

Can You Use an SBA Loan to Buy a Semi-Truck?

SBA 7(a) loans are best fit for adding sem-trucks to your fleet. This type of financing features low-interest rates and favorable repayment terms, with shorter repayment offered based on your specific needs. The SBA underwriting process is notoriously long, but if you need fast funding, you can streamline your search with National Business Capital.

How Do I Apply for a Short-Term Loan?

Applying for a short-term loan is as simple as finding a lender offering this type of financing, but securing terms that fit your needs is a bit more difficult. First, you’ll research lenders and find a few that offer what you’re looking for, taking careful note of the eligibility requirements of each option. Then, you’ll need to gather your business financial information and start applying through each lender. You’ll have to wait for decisions for each application, but if you’re looking to shorten the process considerably, you should team up with National and our 75+ lender marketplace.

Last Updated on December 28, 2022

National Business Capital helps entrepreneurs secure quick and fair financing to save time and cultivate sustainable growth.

Our stress-free online platform is designed for simplicity and speed, helping business owners go from application to approval in a matter of hours. And while we remain a leader in the Fintech industry, our clients agree it’s our personalized service and award-winning team that sets us apart.

From SBA loans to lines of credit, to equipment financing, and more, business owners can access all the different financing programs available to them in one place. Through our streamlined process, we have helped clients secure $2 billion in financing since 2007, and, more importantly, we’ve helped entrepreneurs save a tremendous amount of time and grow faster.

About the Author, Phil Fernandes

Phil serves as VP of Financing for National Business Capital. He boasts 15 years of sales experience, 10 years of managerial experience, and has been with National for over 6 years. His role at National focuses on managing and directing National’s team of Business Finance Advisors and overseeing project development. Phil is also responsible for Financial Reporting, where he prioritizes results and revenue growth. Phil is passionate about sharing his expertise and insight with small business owners, and regularly contributes articles on National’s blog. 

https://www.linkedin.com/in/phil-fernandes-6659a267/


Disclaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advice from National Business Capital and the author. Do not rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely on this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there may be errors, omissions, or mistakes.