Haulage companies can secure loans for fleet expansion by ensuring they know exactly what the fleet needs, then approaching a lender that is best suited to help, whether that is for the purchase or lease of a new or re-purposed vehicle.

Fleet expansion is inevitable for a successful haulage business, it means operations can grow and meet any rising demands in services. For fleet expansion alone there will be a number of different facilities to consider, so we first advise that you speak to your financial advisor before committing to any facility. With that in mind, below we’ll expand on the subject to give a broad overview of things haulage companies should consider when securing a loan for fleet expansion.

Assess Your Fleet Requirements:

As with any loan, it’s important first to know exactly what you need so that you can properly assess how much your business can safely borrow. Numerous things will fall under the umbrella of fleet expansion, including vehicle size and purpose, or whether eco-friendly models are needed to meet emission standards—each loan option will need to be appropriately sized and targeted at the most suitable lender to ensure you can access the best rates, potentially saving your business large sums of money in the long term.

The Right Loan Type:

Being certain that you are approaching the right lender, with the right loan type, will also be important when it comes to securing your facility, with numerous options available to fund fleet expansion, each suiting different needs. Some of these might include:

• Commercial vehicle loans: Through these specialised vehicle loans you can spread the purchase costs of a new or used vehicle for your fleet without the need of large upfront capital.
• Asset finance: With this finance your company can lease a vehicle and pay for it over time, often with the option of buying the same vehicle once the lease term finishes.

Once you have fully evaluated your loan needs, you can then choose an option that aligns with your business’s budget, current cash flow, and longer term goals, as a loan will ultimately create some financial stress on you, so ensure that the return on your investment is worth it.

Evaluating Your Financial Health:

You will also need to be able to prove your financial health to your prospective lender so they can determine your financial position and overall ability to repay the funds you seek. Responsible lenders who have fully scrutinised your books, whether manually or through the use of Open Banking software, should not offer you a loan you may struggle to repay, and it is a reason why it’s so important to do your due diligence on lenders before approaching them. In most cases, you can expect to prepare the following documents:

• Profit and loss statements: Your P&L statement will give a clear picture to a lender of your revenue trends and overall business profitability, and this will help them determine loan affordability.
• Cash flow reports: These reports also highlight your business’s ability to manage ongoing expenses alongside potential loan repayments, and gives us an idea of how well you could continue to meet those repayments.
• Credit history: Business credit scores range between 0-100, with anything above 80 being considered excellent credit. A stronger score tends to mean you can secure better interest rates and terms on your loans. The lower your score, the more risk you will present to lenders, and this will adversely affect your rates.

Collateral Options:

If you are seeking a secure loan, you can consider securing it against some of your existing collateral, whether that is a vehicle or another business asset, and through this you can lower any interest rates on the loan you need while increasing the amounts available. If you have a well maintained fleet for example, you could use your already existing strengths to acquire further vehicles to continue achieving growth for your company.

Preparing A Business Plan:

Some lenders will require a business plan, and by creating a comprehensive one, you will have a much better chance to convince your prospective lenders of both your loan’s viability, and your own viability as a business to reliably make your payments consistently and on time. Some key things to include in your plan will be:

• Loan purpose: The more detailed you can make your explanations with regards to your loan purpose, in this case how your new vehicles will be used to meet growing demands or improve the efficiency of your business, the better a picture your lender can get of where their funds will be going.
• Projected return on investment (ROI): Calculating how your fleet expansion will improve the revenue of your business will also help build confidence with your prospective lender that the loan will be beneficial to your business rather than a long term hindrance, potentially causing a struggle in repayments.
• Market analysis: By demonstrating your knowledge of demands in your sector, especially in the regions you operate, you can build trust with your lender as they will be aware that you know how your industry operates and will be seen as a reliable borrower.

Finding Industry Specialists:

By speaking with your accountant and financial advisor, then focusing on finding lenders or brokers who specialise in haulage financing, you can be certain that the loans will be tailored directly to your needs, and in most cases will offer better terms due to this reason. These lenders should also have a full grasp of the unique challenges of your industry, and will be able to offer a better financial service as a result.

Key considerations when applying for loans in the haulage industry range from initially ensuring the funds align with the company’s exact needs to demonstrating compliance with the industry’s standards and regulations. Each will prove to prospective lenders that you are eligible for the loan and can be trusted as a business.

Each step, from realising that the business needs external financing, to gathering all the correct information to apply, requires its own considerations, too, so if you have been considering the use of a loan to expand your haulage business, read on, and we’ll cover the essentials that will help you get started.

Accurately Defining Your Goals:

One of the primary things a lender will want to know is exactly why you are looking to secure a loan, and this should be important to you, too, because if you are successful in securing the facility, you will want to be sure of where those funds are going. For fleet expansion in particular, most frequent reasons for a loan tend to be for new vehicles, upgrading models, and covering operational costs, such as fuel needs. With a thoroughly defined purpose that you can take to a lender, you can reliably explain to them how the money is going to be used to further the growth of your business.

Prove Your Financial Stability:

It will also be important for you to show your prospective lender that your business is financially healthy, and has a steady enough cash flow to be able to repay the loan. As with other business models, you will need to present profit and loss statements, cash flow reports, and give proof of your credit history. It will also be important for you to address any financial weaknesses, such as high debt-to-income ratios, before you apply for a loan, as it will make it very hard for you to secure one if it becomes immediately apparent that your company is struggling financially.

Evaluating Regulatory Compliance:

With the haulage industry being subject to strict regulations due to things like emission standards and driver safety requirements, you’ll find that being able to prove your compliance to the relevant regulations will help lenders feel reassured with your business. To prove your responsibility, and that you’re actively working to minimise potential risks, keeping records of things like vehicle maintenance papers that your fleet is roadworthy will be essential. Relevant licensing and insurance documents that demonstrate compliance, will each help to develop trust with your prospective lender too. Even after securing your loan, without actively complying with regulations, your business would be liable to fines and potential operational disruptions, which could end up resulting in further financial burdens.

Understanding Market Conditions:

There are many external factors that you will find influence the haulage industry, with the most common being fuel prices and economic demands. Competition can also be a large factor depending on your location, which is why it’s so important to thoroughly assess how each factor could impact your business’s ability to repay its loan.

When it comes to market conditions, you should consider things like the speed of demand growth for haulage services where you operate, and look into how your competitors are pricing their services, and even what services they are offering. The better an understanding of your market you can get, the more likely you are to be able to anticipate any challenges, then strategise to overcome them accordingly. With this information you can prove to your prospective lender that their money is going to a competent firm that can keep up with repayments.

Comparing Loan Terms and Potential Costs:

You should also be aware that different lenders will be able to offer better loan packages compared to others, depending on either their niche, or their regards of you as a reliable borrower. Loan calculators can help you estimate any total costs of borrowing before approaching a lender. They can also help you determine whether the loan will fit within your budget, though you should also consider seeking further advice. This is why we suggest that you always speak to your financial advisor or accountant before you approach a lender for a loan, as they will be able to help you find the best lender for your specific needs. With that said, some important things you should always review when seeking a facility are:

• Interest rates: With interest rates you will want to consider whether a fixed or variable rate will be more suitable for your business model, as each can have a different impact on your long term finances, with a variable rate often being more risky while the economy is unstable.
• Repayment schedules: For most standard loans you will find they require monthly repayments, and loan calculators can be particularly useful for figuring out the long term repayments on these facilities, however something like a revenue based loan, like those offered by us at Nucleus, will require deeper consideration due to the fluctuating repayment requirements.
• Any fees: In most cases when securing a loan there will be things like application fees or early repayment charges to consider, and some lenders may even have hidden costs which you should explore before you commit to a loan.

A Plan for Repayment:

Following on from some points above, when considering loan terms and the potential longer-term costs to your business, you should also ensure that those costs and repayment terms align with your business’s cash flow and revenue patterns. If it becomes immediately obvious that you will be struggling to maintain daily operations with the additional financial burdens that a loan brings, you may need to consider a lower loan size, or come to terms with the fact that right now might not be the best time for your business to take on additional debt. Only take on a loan if you are in the financial position to do so, and ensure those funds will work to help your business achieve growth, not stifle it.

Specialised loans tailored for haulage company needs have been designed to tackle the many unique challenges that are faced in the industry, including high operational costs, fluctuating fuel costs, and the inevitable need for frequent fleet upgrades.

There are of course many more niche needs that haulage companies will need to address across the course of their trading life, though thankfully there are just as many specialised facilities and lenders who can help business owners with those needs. Below we’ll go over a selection of loan options we are aware of on the market that are most sought after by haulage companies to suit their specialised issues.

Commercial Vehicle Loans:

For commercial vehicles, it is possible to acquire loans that target purchasing or upgrading heavy goods vehicles (HGVs) and lorries, or smaller units like vans and trailers. By securing a loan for your commercial vehicles, your company will be able to spread the cost of any new acquisitions across manageable repayments. These types of lenders are specialised in their focus on helping haulage companies obtain new vehicles for your fleet, and you can expect them to align with the lifespan of the vehicle you need. This helps make repayments more practical and sustainable while you focus on growth, as your new asset will ideally be earning you money while you repay its worth. You may also find lenders who focus further into niches like eco-friendly vehicles, and could be worth looking into if your business primarily functions within low emissions zones.

Fuel Focused Loans:

You may also find yourself in need of a way to ease the financial demands of possibly your most significant expense, that being fuel, and specialised lenders will be able to offer facilities tied to fuel cards to ease this burden. Typically, lines of credit are used to allow your company to cover fuel expenses on a deferred payment basis, and in many cases, using your lender’s card, you will be able to buy fuel closer to cost price at specific partner stations. The larger your fleet, and the longer term you use fuel focused loans, the more you can expect to save.

Driver Recruitment and Training Loans:

With a company in the haulage sector, you will likely also be aware of the ongoing driver shortages in the UK, and while we are not affected by this, we understand that it has made recruiting, training, and keeping drivers on all the more important for achieving sustained growth in your business.

If your focus is on a need for drivers, there are lenders on the market who specialise in covering the costs of hiring and certifying drivers, and are worth exploring to help expand your company. Through government funded bootcamps, and advanced learner loans, you can expect to be able to secure expenses for things like HGV training and certification, with some lenders specialising in retention programmes, offering additional training opportunities to your current drivers. Making the right investments in your drivers will be the surest way to ensure your business thrives, and the right lender can help you achieve this.

Depot and Infrastructure:

If your financial needs are more focused on expanding or improving your current facilities, whether that is for warehouse upgrades, parking lots, or improving any logistics systems currently in operation, you can also explore lenders who focus on this area. Depot and infrastructure focused lenders can help you improve your haulage processes, from loading to delivery, offering long term financing, typically with repayment terms aligning with the projected return on investment (ROI) of any improvements you make. In a case where you need to increase the size of your depot for example, to accommodate for a larger fleet, an infrastructure loan can be used to cover construction costs without you needing to put financial strain on other areas of your operation.

Technology Integration Loans:

For some haulage companies, you may also be in a position where either the technology you’re using to organise and operate your fleet is lacking, or the vehicles in the fleet could use some upgrades to help with operational efficiency. Integration loans can provide funding for tools like GPS tracking and telematic systems, or route optimisation software, all aimed to help lower fuel consumption and improve the longevity of your fleet’s lifespan. In many cases, improved efficiency also leads to better customer service, placing your company ahead of the competition.

Specialised loans that have been tailored to help UK companies target specific industry challenges are likely to have better rates than more general facilities. To ensure you get the best deal you should always approach your accountant or financial advisor when planning to apply for a specialised loan to help find the best lender for those needs. Whether you find yourself in need of funding for vehicles, fuel for your fleet, new tech for it, or infrastructure to improve your company’s overall ability to operate, finding the right type of financing can help you overcome financial hurdles while you continue pursuing growth and success.