How Transport Companies Get Funding

Getting funding for your transport company can be very rigorous, given the wide scope of expenses you might have to cover, such as vehicle insurance, employee salaries, operation costs, etc. However, no matter how rigorous the process might be, getting sufficient funding for your transport company is possible. 

Transport companies get funding by being able to articulate the goals and objectives of the business and, in addition, any necessary information that can convince your investor or lender that their monetary input into your company will benefit them either through payments with interest or returns on investment. You can add all this information to your proposal or your presentation.

It is important to note that the amount of funding you need for your transport company will depend on the scale on which you want to start your business or on which you want to expand your business.

Some of the ways in which you can get funding for your transport company are:

1. Personal Funding
2. Business loans
3. Angel investors
4. Friends and Family
5. Venture capital
6. Gas/Fuel cards
7. Trade credit
8. Grants
9. Business Incubators and accelerators

Personal Funding

Funding your transport company through personal savings involves using funds from your personal savings account, checking account, investments, cash on hand, and monetary assets. Additionally, you can increase your personal funds by selling personal assets. This can also be called bootstrapping. 

Funding your transport company through your personal funds might be stressful, depending on the scale on which you are looking to start your transport company. However, you can hire a financial analyst/advisor to conduct a financial evaluation on your personal funds to help you decide what scale of business best fits the scale in which you want to start or expand your business.  

Business Loans

A business loan is a type of loan created to provide capital for businesses for repayment with an interest rate and a fee. You may receive a business loan as a lump sum or a credit line (continuous streams of loans to a specific amount limit). 

Some of the business loans you can use to start up your transport business are:

Small Business Administration Loans

As the name implies, you can only qualify for a small business loan if you want to start your transport company on a small scale. It can take up to three months to get approval for a small business administration loan. However, you get to pay back the loan with lower interest rates and fees than other business loan types. 

Tip: If you want to qualify for a small business loan, you need to have a credit score of 680 and above. This means that you need to build up your credit score.

Startup Loans

Applying for a startup loan will help you fund your business’s essential equipment. However, your company needs to be established for at least one year to be qualified for a startup loan. If you need to borrow money for your transport company sooner, a startup loan will be the best option. 

Business Lines of credit

This type of funding will give you access to loans as needed and pay interest on what you have borrowed. Usually, the issuer of the credit will set a credit limit. This will be your best option if you need a continuous fund source for your transport company. If you are granted a business line of credit, it will usually work like a credit card. 

Equipment Financing

This type of business loan will help you with funds when you need to purchase equipment for running your transport business. Usually, the lender might offer you a repayment period of 25 years and above, depending on the amount of loan you have requested, using the purchased equipment as collateral.

Angel Investors

Angel investors are individuals with a high net worth that provide financial support for entrepreneurs and start-ups, usually in exchange for ownership equity of the company, as they might not require collateral or payment from you. If you can prove that your transport business has the potential to yield favorable returns, then you might be able to win an angel investor for your business.

Tip: You might likely find an angel investor within your family, friends, acquaintances, and other entrepreneurs. You will just need to communicate your goals and objectives of your transport company properly and convincingly and, in addition, improve your networking skills to be able to meet angel investors who might be interested in funding your company’s operations.

Family and Friends

Besides the option of angel investors who seek to obtain equity from your business by providing funds, your family and friends can choose to help you with funds for starting or expanding your business without expecting anything in return. Usually, you might have to combine this source of funding with your personal financing to begin your transport company. 

Venture Capital

Venture capital is a source of funding similar to angel investors. However, they are firms that are looking to invest in startups in exchange for ownership of equities. To get funding approval from a venture capital firm, your company must demonstrate a high potential for growth and service uniqueness of your transport company.

Gas/Fuel Cards

These are forms of credit cards that are used to purchase or maintain vehicles and purchase items in the gas station. If you want to finance the fuelling and maintenance of your vehicles in your transport company, this will be a good option for you. Also, gas/fuel cards have a limit of $50 per day, which your transport company can manage if your transport company is operating on a small scale.

Trade Credit

Trade credits are business-to-business (b2b) agreements used to purchase goods without paying upfront and agreeing to payment later. They are usually used as a short-term option to fund the purchase of your business materials.

For example, suppose you need to purchase office materials for your transport company. In that case, you can use trade credit to fund these types of purchases based on the agreement with your supplier. In addition, you can purchase more expensive fixed capital items such as the vehicles your company will need for operations.

Grants

A grant is an amount of money given to an individual or a business to finance a project. The government or other institution usually offers grants. A grant is typically a gift, and you are not required to pay the government or the institution back for their assistance. 

For you to qualify for a grant, you need to ensure that you must present a convincing proposal of why you need the grant. In addition, you might need to speculate on the potential growth your transport company can achieve from the grant and how your company can give back some of these benefits to society.

Business Incubators and Accelerators

Business incubators are companies that help start-ups and entrepreneurs to begin their operations by providing capital, management training, and an office space if needed. In addition, they sometimes act as accelerators to further ensure that the business thrives by fostering growth strategies that lead to growth.

Business accelerators and incubators aim to conclude with venture capital funding.

Crowdfunding

This is a more informal means of raising money, usually online by gathering funds from a large number of people for a secure and easy to use service in return.

Frequently Asked Questions

How do I know which type of funding is best for my transport business?

For you to know the best type of funding for your transport business, you might need first to figure out the scale on which your business is starting or expanding, after which you might need the services of a financial planner or advisor to help your articulate your financial history and needs in a clear and understanding way that will appeal to a potential investor. 

Doing this will also help you understand how much of your personal finances you can use for the start-up or advancement of your business and be able to afford the purchase of your essential goods and services for the time being.

Can I combine different sources of funding for my transport business?

Yes! You can combine different sources of funding for your transport business. However, you must ensure that you are not breaching a contract with any of your investors by including funding assistance from another investor. In addition, for some investor sources such as family and friends, grants, gas/fuel cards, etc. Therefore, you may have to supplement with personal funding options.

What should my proposal request for funding contain?

Your proposal should be explanatory and understandable for the investor. Your proposal can either be written or given through a face-to-face meeting. However, in this case, your proposal must contain these features:

• An overview of your transport company
• A potential solution to a recurring/observed problem in the transportation industry
• How your transport company intends to implement these solutions 
• The expected results.
• The amount of funding needed
• Your plan towards allocating the funds to your various operations.
• Benefits for the investor
• Speculated time of repayment

Tip: Your proposal’s tone must be convincing, confident, reasonable, and expectant.

To learn more on how to plan your own transport business click here!

Please note that the contents of this blog are for informational and entertainment purposes only and should not be construed as legal advice. Any action taken based on the information provided in this blog is solely at your own risk. Additionally, all images used in this blog are generated under the CC0 license of Creative Commons, which means they are free to use for any purpose without attribution.