Starting out, truck financing can seem complicated, but it doesn’t need to be. Every trucking company faces a few key choices. Here’s a breakdown.
Big or small, alongside what trucks you need and how to manage your fleet, financing is always going to be a key concern for your transport business. So, what are some of the key choices and potential pitfalls?
Put simply, customers have an array of financing options, where they take varying degrees of responsibility for the truck. On one end, is a very simple loan covering only the cost of the truck, on the other, a full-service lease agreement, covering everything except the fuel and driver. The choice you have will largely come down to what risk do you want to cover and what are you willing to outsource? How much are you willing to put into the day-to-day management of your fleet and how much effort do you want to put into your customers and growing your business?
When looking to secure financing, there are several possibilities. You can go to a major bank, an independent financial provider or a captive financing company run by truck OEMs, including Volvo Financial Services, where I work. Captive financing can make a lot of sense as your provider will know the market, understand your business and can offer insight and help if you run into trouble. Captive financing can be a second source for your financing needs by financing your facilities through a bank, and your trucks through captive financing. So you can preserve your credit line with your bank. You can use that for other purposes.
In the truck business, financing terms are normally set on a deal-by-deal basis, but they will generally depend on scoring factors including the experience of the owner, the transport company’s financial results, whether the business is in a niche market and whether there are long-term contracts in place with reliable customers that cover the finance period. Making sure that you are able to show strength when it comes to some of these factors will ensure more favorable terms.
At the end of the day, financing is not a separate entity or decision from how you manage your trucks or maintain them. In fact it is a key enabler for optimizing your operations and ensuring that you have a solid plan to meet your business needs both today and tomorrow.
In order to help you understand the different financing options that are available I have prepared a guide that details key areas of consideration and the questions you should ask yourself. The short guide will help you:
Understand the current and future financing needs of your business
Differentiate between different lender options
Determine whether considerations like off-balance or full-leasing are right for your business