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The transportation industry is essential to the U.S. economy. As we saw during the Covid-19 pandemic, it’s almost impossible to have fully stocked grocery stores and other establishments without hardworking trucking companies bringing the products we love from point A to point B.
In other words, interstate commerce can’t happen without the transportation industry, so it’s important for every entrepreneur in this space to take advantage of any opportunity that comes their way.
What Is a Business Line of Credit, and How Does It Work?
A business line of credit is a type of financing that provides access to capital on a flexible basis. Unlike a loan, which you must repay in full with interest, you can use your line of credit on an as-needed basis, and only the borrowed amount will accrue interest. Most lines of credit are revolving, too, which means you can draw the same funds you took previously after paying down your existing balance. Although this type of financing may sound similar to a business credit card, the two are very different in their application. Business credit cards work exactly like a personal credit card does, whereas a business line of credit allows you to draw physical cash at a moment’s notice. A business line of credit is more difficult to secure compared to a business credit card, but the benefits are worth the effort. Trucking businesses often use lines of credit to cover the cost of fuel and other expenses, but you aren’t limited to these expenses. You can use your business line of credit for payroll, rent, and marketing if you’d prefer. As long as you manage your repayments and don’t overload your credit line, you’ll find it much easier to handle your monthly expenses once you have a trucking business line of credit behind you.The Importance of Trucking Financing
Trucking businesses are different than most, but they aren’t immune to the entrepreneurial challenges that other industries face, like cash flow constraints. Not only will you need to purchase equipment and supplies, but you’ll have to have the proper licenses and insurance coverage whenever you’re up and running. With fuel and vehicle costs fluctuating dramatically on a monthly and annual basis, it’s difficult for these businesses to forecast for the future. You won’t know how much your expenses will be in 6 months or next year, nor will you be able to anticipate a sudden repair expense to get one of your vehicles back on the road. This lack of predictability forces many entrepreneurs in this industry to adopt a cautious business model—one where they have to forgo growth opportunities to ensure their operations can cover future expenses. While it’s an understandable decision, you can’t stay stagnant for long. You’ll need to grow if you want to maintain your place in the industry, which is why many trucking companies leverage business lines of credit to help them stay one step ahead of the latest challenge.Why Do You Need a Trucking Business Line of Credit?
A business line of credit is an important financial tool for businesses of all sizes. For trucking businesses, a trucking business line of credit can be used for a variety of purposes, such as purchasing new trucks, making repairs to existing trucks, or covering unexpected expenses. Let’s take a closer look at some of the benefits of having a business line of credit.Flexibility
Business lines of credit are one of the most flexible financing options available to entrepreneurs. The revolving nature of lines of credit allows you to stay one step ahead of the latest challenge and, more importantly, gives you an opportunity to forecast for the future. You won’t have to worry if a growth opportunity will leave you without the funds to pay for more costly expenses down the line; You’ll have your line of credit behind you to help you account for the fluctuating costs.Easy Qualifications
Another benefit of a business line of credit is that they are relatively easy to qualify for. As long as you have good personal and business credit, you should be able to qualify for a business line of credit from most lenders, but it’s a little more complicated if you’re seeking a higher limit. For example, if you’re seeking to secure a credit line of $750,000+, you’ll need to have a higher credit score, a lengthy time in business, and solid annual revenue.Revolving Credit
Revolving credit allows you to borrow money again after paying back what you owe. It usually has a limit on how much you can borrow at one time, and it may also have a grace period (usually between 20-25 days) during which you do not have to pay any interest on the borrowed amount. Most business lines of credit are revolving, which is perfect for an entrepreneur who wants to stay vigilant against unforeseen expenses. It is also a great option when it comes to trucking business line of credit.Forecast for the Future
The trucking industry relies heavily on commodities with unstable costs. The price of fuel and vehicles fluctuates dramatically both monthly and annually, which adds a degree of challenge to forecasting. For example, let’s say you have an opportunity to take over some of your competitor’s routes. You know you’ll need extra vehicles and staff to handle the work, but with the price of fuel rising again, there’s no telling if you can afford to take on these extra routes and pay for your expenses in a few months. If you’ve secured a business line of credit, you’ll have more assurance that your business can handle price fluctuations and sudden expenses, allowing you to take on new routes and grow with confidence.How to Qualify for a Trucking Business Line of Credit
Qualifications will vary from lender to lender, but there are three main criteria that most lenders rely on – time in business, annual revenue, and credit score. Your time in business demonstrates your experience, annual revenue shows your profitability, and your credit score provides lenders with a detailed history of how you’ve handled credit in the past.Banks and Credit Unions | Non-Bank Lenders |
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