Business Loans and Uses
The transportation industry is large and diverse, and trucking businesses involved in this sector are required to maintain safety and efficiency standards, which can be costly. In addition to the proper equipment needed to run a transportation business, the business must also be able to manage multiple licenses, rules, and scheduled maintenance procedures. Trucking businesses also need to comply with a variety of laws that regulate the weight and size of loads. The loan money can be used to finance these start-up costs, and it can also fund the operations costs necessary to generate enough profit to repay the business loan.
Type of Trucking Loans Available
The most common form of lending will occur in the banking sector. Credit unions may also be willing to finance certain businesses as well, but each lending institution has slightly different requirements for approving a loan for a trucking business. This process usually involves reviewing a business plan and financial statements. The importance of having these documents in order cannot be overstated. Collateral and solvency are carefully reviewed before making any determination about the borrower’s ability to repay the loan.
The Small Business Administration, or SBA, offers alternate programs for business owners who do not qualify for a loan under the rules of most traditional lending institutions. However, it is necessary to go through a bank or credit union that participates in one of these SBA programs. The SBA does not lend money directly, but they do provide many services that assist the borrower in preparing a convincing application. If the loan application is approved by the lending institution, the SBA will guarantee the loan, which improves the chances of approval.
Barriers to Loan Approval
Transportation business owners will face a variety of barriers to entry, and many bureaucratic obstacles can create complications. The nature of the obstacle is usually closely related to the specific industry. For example, trucking and aviation are two of the most expensive businesses to run within the transportation sector. The start-up costs are prohibitive for most business owners, and this creates an incentive to apply for a loan.
There are many pieces of equipment needed to run a successful transportation business. For example, electronic machines can be used for paying fines, buying materials and registering with various agencies. Obtaining permits, licenses and permission from the various regulatory bodies can be time-consuming, yet this needs to be done correctly. Recruiting qualified human resource personnel can also present a barrier to entering the industry.
Qualifications for Transportation Business Loans
Transportation business owners must be able to explain their business plan through financial statements, and long-term planning is essential when dealing with lending institutions. Credit reports will be examined for past payment behavior, and the borrower’s financial statements will be carefully examined by a professional. Lenders want to see proof of successful operation before approving a loan, so they will look at the profit and loss statement, cash flows and balance sheet to determine the financial health of the business. These statements communicate value to potential investors.