While getting into the transport industry isn’t difficult, truck drivers and transport operators face many barriers to expanding their business operations.
Financing a fleet of vehicles or a new rig is a big decision, and new drivers can easily get caught out when it comes time to make repayments. If you are considering expanding your transport business, consider these points first before applying for vehicle finance.
Do I have the business support to expand right now?
There’s always a risk to expanding any business. While Australia’s logistic sector provides many opportunities for success, new operators shouldn’t view the industry as a cash cow. Driver shortages, licence and toll expenses, long-haul expenses, driver training and development costs can all impact your business.
Before expanding your business with vehicle finance, make sure that you have contracts to cover the extra costs of expanding your fleet. One mistake many operators make is growing too quickly. A business plan that includes income forecasting will help you determine whether your operation is ready to expand.
What type of vehicle will I purchase with vehicle finance?
Before applying for any vehicle finance, thoroughly research what type of vehicle you want to purchase. If you approach a traditional bank for finance, they’ll require information about what kind of truck or equipment you want to buy.
Consider whether you’ll buy a new or used vehicle. New vehicles are more expensive, but you’ll benefit from a full warranty and save money on maintenance costs. Used vehicles are more affordable, but you may have to spend more time looking for the perfect fit.
Before you apply for vehicle finance, think about what type of fuel efficiency your new vehicle should have — will you be driving long haul or spending a lot of time in traffic or cities? If your business operates in the city, a professional-looking fleet of vehicles is better for your business image. Professional vehicle painting or wrapping can help raise awareness for your business but will cost additional money. You may want to factor this into your loan amount.
How will expanding affect the quality of my work?
Many businesses consider whether they can expand their business before considering whether they should expand. Studies show that focusing on the quality of your services — like meeting delivery deadlines and taking good care of the goods you are transporting — should be a top priority for logistics companies.
Consider how your expansion will affect your existing clients. Will your business be spread too thin if you expand right now? Or will investing in more transportation improve the speed of your service? Expanding your business may have hidden upsides, like saving money on petrol by upgrading to a more fuel-efficient vehicle fleet.
Can my business processes keep up with more work?
It’s all well and good to consider expanding your transport business with vehicle finance, but are your staff and processes ready to take on more work?
Before investing in new equipment or vehicles, consider what processes your business has to keep up with demand. The aim is to scale your business as much as possible.
Digitising and automating any internal systems can help boost productivity. Smart systems will help your administrative staff do their jobs more efficiently and ensure you keep up with everything from chasing invoices to paying staff.
How will I finance my expansion?
The cost of financing vehicles is one of the largest expenses transport, and logistic businesses have to manage. Make sure you research all the options available to you. Most businesses choose from the following options:
Self-funding: Vehicles are expensive, and waiting until you have enough money to fund an expansion could mean missing out on new business opportunities. However, you’ll also own your vehicle outright and won’t have to make repayments.
Traditional banks: You’ll need to approach your bank with a business plan, a clear idea of what you’re buying, and a forecasting of future income to prove you can service the loan. Traditional banks can take a long time to process business loans, so ensure you have all your paperwork in order. Keep in mind banks require:
- Up-to-date financials: Your finances need to be in order. Banks will not lend to borrowers with ATO debt.
- Proof of income: You’ll need to show your business is profitable and you have a clear ability to service the loan.
- Vehicle information: Banks are particular about the type of asset, private sales and age of the asset. Many banks will not approve lending on second-hand vehicles.
Non-traditional lenders: If you’re looking to fund your expansion quickly and with minimal paperwork, non-traditional lenders can be a great option. You don’t need checkable credit, but you will need satisfactory credit file scoring. The benefits of using a non-traditional lender for vehicle finance include:
- More flexibility: Use funds to purchase older, or second-hand vehicles
- Minimal-supporting documents: Less paperwork required than traditional banks
- Flexible with ATO debt: You won’t get turned away for having ATO debt
- Innovative thinking: Solution-oriented service. Lenders are focused on solving your problems
- Streamline processes: Online applications and electronic contracts make securing funding faster
If you’re ready to expand your transport business with vehicle finance, ThinkCap can help. We have access to over 75 lenders and a straightforward application process that simplifies securing equipment and vehicle finance. Find out more here.
