Whether you are starting a new haulage business, or trying to grow an existing company, you will feel a lot of financial pressure.
This is most certainly the case for the haulage industry. The high cost of fuel, keeping up with your direct competitors, and maintaining a high standard throughout your business are all financially challenging elements when working in haulage. Therefore, you need to know all about the best way to finance your business venture.
The good news is that there are many ways of doing this, and a wide variety of options available to you. You can utilise your personal savings and dive into the cash you have gathered over an extended period, or you can use crowdfunding techniques to find your way, the choice is yours to make.
There isn’t a single answer that fits all companies when it comes to sources of funding for your haulage business, as each business is unique in some way. With that in mind, this guide will hopefully push you towards the type of financial practice you need to investigate to keep your company on the top of its game.
Funding solutions for haulage businesses
Let’s look at the different types of finance for haulage companies regardless if you are looking to start a haulage business or been trading a number of years.
Invoice financing
One of the best ways to fund your company regardless of if it is a new start-up or an established entity is via the use of haulage factoring.
Using this type of funding it creates an injection of working capital into your haulage business, which you can use for any purpose. The extra money could be used for:
- Finance expansion and growth
- Fund large orders, or negotiate early settlement discounts from suppliers
- Purchase stock, materials, or equipment
- Acquire or buy another business
- Pay off creditors, HMRC arrears or staff wages
Personal savings
Using your personal savings can be the best way of financing a haulage venture. It will keep the power of where and how you spend money in your own hands, regardless of whether this is on market expansion or hardware purchases, for instance. Moreover, it also means you will not create any third-party debt. You may also feel more personal satisfaction this way as you have grown your business off your own back.
Obviously, the significant hindrance to utilising personal savings is that you will not get the direction that you would have gotten through other financing choices, for example, mentorship given by investors or industry-explicit guidance given by asset finance suppliers.
Bank loans and overdrafts
This source of financing may not be quite as popular as they once were, but they remain a trusted way to gain an injection of cash when your small business venture needs it the most. You will need to perform some research into interest rates and hidden fees before applying, but it may be a suitable option for your new venture.
If you have a great credit score, you may be able to find a bank offering a low interest rate. Also, you will not be required to give up any control of your recycling business if you utilise this finance method.
Although, obtaining bank loans is becoming increasingly difficult for smaller business ventures, regardless of what industry they operate within, especially those that do not have a perfect history of credit. This financial option can prove to be time-consuming, tedious, and frustrating. Be aware that unsecured business loans are available in the UK and may provide a better monetary solution to your venture.
Crowdfunding
Crowdfunding is a funding method that has largely grown in popularity over the past few years, and it could be a useful option for UK-based recyclers. It is ideal for those out there who are looking to finance new ideas and creative projects.
You can sign up to a crowdfunding website, tell your story, lay out what it is you’re looking to achieve and set a financial goal you’re looking to reach. You’ll then need to promote your own campaign to try and obtain donations.
You should be aware that a good credit history is not a requirement for this style of funding method, so if you’re failing to secure a loan because of poor credit, this could be an alternative that works for you and your business. Also, if you manage to create a good campaign that receives a lot of donations, you’ll have buzz around your project, giving you an instant audience to interact with and potentially make money from.
However, it will likely be difficult to raise the funds you’re looking to raise with this method of financing, as there is no guarantee your campaign will even be noticed by anyone.
You’ll really need to put your maximum effort into investing into your story, and unless your campaign really takes off and reaches a large amount of people, getting your desired funding may well be an extremely slow process.
Friends and family members
Another method of financing your haulage business is to request that resources from your friends and family members. Not everyone will be comfortable doing this, but as we mentioned at the start of this article, different solutions apply to different organisations.
The clear advantage here is that you can get instance access to the funding, and not need to go through the typical difficulties that you experience when attempting to get to a bank loan.
However, you must remain careful here as this can be a precarious system and negatively effect on personal relationships, especially if you’re requesting money which you aren’t 100% sure you’ll be able to pay back.
Angel investors
High-net-worth investors that are searching for potential business opportunities to invest in are sometimes known as angel investors. Not only will these people provide funding for your venture, but they can also offer advice that will be highly valuable to young and new business owners alike; their experience is golden. It isn’t all rosy when it comes to angel investors however, so you’ll need to be aware of the following:
Although you don’t need to pay back the capital to your investor, you will be handing over equity in your business and a percentage of your future net earnings.
You can anticipate that angel investors will adopt a very hands-on approach; they will need to be a functioning part in settling on any choices with respect to your start-up. If you don’t like giving away some of your freedom regarding your company, perhaps you should stay clear of this form of finance.
Asset financing
Having tractor units and trailers that is consistent with guidelines is key in the haulage industry but covering the cost of this gear can be troublesome. On the off chance that you’re hoping to upgrade your equipment, asset finance can regularly be the best type of funding.
Asset finance basically makes your hardware pay for itself, implying that before the end of the agreement your business has understood its development and you can manage the cost of the repayments on the recycling gear you’ve gotten asset finance for.
An enormous scope of resources can be financed – from tractor units through to trailers
Department of Transport Grants
The Department for Transport is currently running two schemes that facilitate the purchase of the environmental and social benefits that result from using rail or water transport instead of road. These are:
- Mode Shift Revenue Support (MSRS) scheme: assists companies with the operating costs associated with running rail and inland waterway freight transport instead of road (where rail/ inland waterways are more expensive than road).
- Waterborne Freight Grant scheme (WFG): assists companies with the operating costs, for up to three years, associated with running coastal and short sea shipping freight transport instead of road (where short sea/ coastal shipping is more expensive than road). Applications for the Department’s freight grant schemes are prioritised in a bid round process.
Read more : Scotlands Top 20 largest haulage businesses
Conclusion
Financing a haulage company involves careful financial planning and management. It requires capital for various expenses, such as purchasing or leasing trucks, trailers, and other necessary equipment, as well as covering operational costs such as fuel, maintenance, insurance, and employee salaries. Funding options may include securing loans from banks or other financial institutions, seeking investment from private investors or venture capitalists, utilising personal savings or equity, or exploring government grants or funding programs for the transportation industry.
Efficient financial management, including budgeting, cash flow analysis, and cost control, is essential to ensure smooth operations and profitability. It is important to develop a solid business plan and financial projections to present to potential lenders or investors, and to carefully evaluate and choose the most suitable financing options for the haulage company’s specific needs and circumstances.
Seasoned professional with a strong passion for the world of business finance. With over twenty years of dedicated experience in the field, my journey into the world of business finance began with a relentless curiosity for understanding the intricate workings of financial systems.