As a trucking company owner, what are your goals for the long term? The facts are that 90% of fleets with six trucks or less fail to thrive and end up closing their doors for good. Lack of experience plays a role in that.
It’s important to have both short-term and long-term goals laid out. It’s also important to avoid the seven most common reasons businesses fail.
- Didn’t check a new client’s credit history
- Failure to comply with FMCSA regulations
- Inadequate bookkeeping and payroll practices
- Insufficient staffing
- Lack of a business plan
- Poor short-term and long-term financial planning
- Too little insurance
Many of these issues are avoidable if you take time, do your research, and have the right financial and professional partnerships in place. Saint John Capital supports short-term and long-term goals in the following ways and with the following services.
Freight Factoring Arrangements
Freight factoring is a service where you sell your unpaid invoice to a freight factoring company at a discounted rate. Suppose your client owes you $10,000 for the load you just delivered. They insist on Net 30 payment terms, so you have to wait an entire month to get paid.
Plus, they pay by check, so you have to wait for the check to arrive in the mail, which can take a week with slower USPS delivery time frames. You also have to wait for the check to clear your and your client’s banks.
Instead of waiting, you could enter a freight factoring agreement and let a factoring company help out. Most fees are under 5%, but for this example, we’ll use the higher 5% fee. You’re owed $10,000, but you could be waiting for six weeks until the money is in your account. Or, you could pay a factoring company 5% of the $10,000 and have the money as quickly as that same day. You’d get $9.500 instead of $10,000, but the money is there and helps you avoid late payment fees, penalties, and other avoidable expenses caused by a lack of available funds.
You have the choice of getting 50% of the money you’re owed when you pick up a load or 100% after you deliver it. If you upload your bill of loading by noon EST, you can also get paid the same day, which can be a tremendous benefit when you’re starting out.
There is a risk of having to pay back the funds you received if your client doesn’t pay. A non-recourse arrangement helps protect against this. The fees are higher, but you have insurance against being asked to pay back the money you received in cases where your client suddenly files for bankruptcy or closes its doors unexpectedly. With a recourse arrangement, the fees are lower, but you have to pay the funds back if your client fails to pay.
Fees for freight factoring arrangements depend on a number of factors.
- Are you getting paid on the same day or in a couple of days?
- Are you signing a recourse or non-recourse agreement?
- Do you want 50% cash advances when picking up a load or 100% after delivery?
- How many trucks are in your fleet?
- How long have you been in business?
- What is your credit rating? How about your clients?
- How long is the freight factoring agreement?
- Are you asking for a flat rate or a tiered (variable) rate?
One thing that trucking company owners do not always realize is that you are not obligated to factor every client. If you have a client that you trust and prefer to invoice on your own, Saint John Capital welcomes you to keep doing things that way. You do not have to hand over all of your accounts to us. Pick and choose the ones that you want us to handle and keep the ones you like handling on your own.
Click & Pay API
Click & Pay API is a time saver and it also makes it easier to handle your bookkeeping. Instead of needing to mail an invoice and wait for payment, you can take a photo of a bill of lading and upload it directly to Saint John Capital.
We go over the paperwork, send you the money upon approval, and generate an invoice for you. You then have an invoice you can upload to your accounting software. Your client has an invoice and the ability to submit payment online.
Load-Finding Tools
A long-term financial strategy requires careful planning around the slow periods. Holiday deliveries keep you busy through September and into December, but then a lull hits for a lot of the trucking industry. Those lulls place a lot of strain on your monthly revenues.
Load-finding tools are essential for finding work in the slow periods. Look for companies that need truckers and fill your trailers with one or more loads heading to the same destination. This is also a good way to ensure your drivers are making trips there and back with full trucks, which maximizes the money you make.
Free Business Credit Checks
When you’re taking on a new client through a load-finding app or word-of-mouth referrals, a free business credit check is crucial. You need to see if that broker or shipper has a history of late payments or missed payments. Saint John Capital provides unlimited free business credit checks.
Make sure you look over a company’s credit history before you agree to work with them. It helps you weed out the companies that owe money to a lot of people. That’s a sign of financial troubles that could indicate a sudden shutdown or bankruptcy filing.
Fuel Discounts
Fuel discounts provide savings that add up over time. Your trucks’ fuel tanks hold 300 gallons. At the current (8/12/24) average cost of diesel ($3.704), a complete fill-up could run you $1,111.20. If your truck takes gas ($3.414), a complete fill-up would cost $1,024.20. It’s expensive.
Now, imagine if you were getting 10 cents off per gallon on every fill-up. You’d save $300 each time. Those savings quickly add up and can be money you save for slower periods.
Low-Interest Business Lines of Credit
Finally, manage the slow periods with a low-interest business line of credit. Instead of running low on cash in the off-season and having no funds to pay your drivers, use the line of credit to keep on top of your expenses. When things pick back up, you can pay off what you drew from your credit line.
Expert Industry Knowledge
Saint John Capital has been a financial partner to both small and large trucking companies since the 1990s. We’ve helped many small companies grow into major ones. Complete the online form or call us to get a free quote and discuss the different freight factoring arrangements and services that help your business develop a long-term financial plan.
