transporation business

Best Transportation Business Loans for 2021

A transportation business loan can help keep cash flow steady and promote working capital around the year. Commercial trucking and passenger transportation companies often depend on small business financing to help them with their day-to-day financial operations and long-term financial goals.

Financially Reviewed by Thomas J. Brock

At a glance Lenders that specifically cater to the transportation industry are typically more forgiving and tend to provide a greater chance of a return on investment. You can get the financing you require without repaying too much for too long. When you apply for an industry-specific loan, lenders assess your business plan to see how they can help meet your particular financial requirements. They will also let you know what your best repayment options are.   

Best Transportation Business Loans - A Quick Overview

Here is a quick summary of the best transportation loan types with a list of the recommended lenders, before we hit the road with our detailed guide.

Financing Need

Best Loan Type

Loan Features

Recommended Lender

Initial capital

Short-term loan

  • Amount: Up to $250,000
  • Term: Up to 18 months
  • Interest: Varies
  • Time to get the loan: 24 hours

PayPal Working Capital

Equipment 

Equipment financing

  • Amount: 100% value of equipment
  • Term: Up to 6 years
  • Interest: Typically, between 4% and 40%
  • Time to get the loan: Up to 48 hours 

Funding Circle

Transportation factoring

Invoice financing

  • Amount: Up to 100% of the invoice value
  • Term: When the client pays
  • Factor fee: Typically, 1.00% - 3.00%
  • Time to get the loan: Up to 24 hours

BlueVine

Salaries, fuel, logistics

Business line of credit

  • Amount: Up to $500,000
  • Term: Typically, up to 18 months
  • Interest: Typically, between 7.00% and 25.00%
  • Time to get the loan: Up to 24 hours

OnDeck

Transportation grants

SBA loans

  • Amount: Up to $5 million
  • Term: Up to 25 years
  • Interest: As low as 4.75%
  • Time to get the loan: Up to 2 weeks

Fundera

Equipment repairs and maintenance, inventory purchases, staff salaries, vehicle maintenance,  traffic expenses, fuel,  damages, insurance

Merchant Cash Advance

  • Amount: Up to $500,000
  • Term: No set terms
  • Interest: One-time factor rate
  • Time to get the loan: Up to 24 hours

Fora Financial

Best Transportation Business Loans Explained

Now, let’s take a deeper look at the top loan types mentioned above. Here we will consider the benefits of each loan type and we will provide a closer look at our recommended lenders. 

1. PayPal - Best for Short-Term Loan

Short-term loans are an excellent way to obtain the initial capital you need to open your transportation business. A loan can help you plan ahead for the next year or so, and allocate funds towards your planned objective. If you approach the right lender you won’t need a track record to obtain the startup finances you need to get you through the first few months. 

The first six months are vital to the survival of your transportation business. You will need to build up your clientele and get your revenue rolling, in order to cover your expenses and any debt you may have. If you plan out your finances well, you may be able to repay your loan sooner than expected. 

PayPal Working Capital has experience providing short-term loans for companies from various sectors. If you plan on using PayPal as one of your payment methods, a PayPal loan is an excellent option. It will likely help you out during the beginning stages of your business. 

2. Funding Circle - Best for Equipment Financing

Equipment financing is another solid loan type. You can use equipment financing to buy vehicles, equipment, tools, and attachments. What makes this option appealing is that you generally receive all the funds you need - you can obtain up to 100% of the required value. An equipment financing loan is a great way to ensure you have all the trucking and logistical items you need when you open your door to the public. 

While you can rely on your operating and capital funds to run your day-to-day business, your fleet and equipment are what will bring in the revenue. Without it, no transportation service will last for long. This is why an equipment financing loan is such an important loan type for entrepreneurs in the transportation business. 

Funding Circle is a peer-to-peer network that also provides equipment loans. It has competitive rates. With Funding Circle you can also invest in other financing solutions once your business is up and running.

3. BlueVine - Best for Invoice Factoring

Invoice financing works as follows: a lender buys your current debt in exchange for a factor fee. There is no repayment period, as the lender takes a percentage of the money when your client pays. Invoice financing will help you when you are waiting for your customers to pay their outstanding bills. With payment clauses of up to 45 days, sometimes this can take time. 

Invoice factoring is vital during your first year of operations. During this time you are establishing your client base. You may find that clients only pay you once a month or even more infrequently.   Since you will need to cover daily expenses, you can obtain funds from an investor who’s willing to wait for the debt to arrive.

BlueVine offers several loan options; one of which is invoice factoring. BlueVine releases fund relatively quickly, ensuring that your transportation business can continue running while you await payment from your clients. BlueVine also lets you manage your payments via an online portal.     

4. OnDeck - Best for Business Line of Credit

What happens when you’re not sure how much money you will need to cover your driver and employee wages, maintenance, or utility bills? A business line of credit consists of a lump sum that you can access when you need it, and you only pay for what you use. If you manage to maintain your payments for the loan term, the lender may expand the funds available for the next period.

Wages, fuel, and daily logistical costs are only some of the expenses you may need to cover on an ongoing basis. While you can use your capital and operating budgets to buy new assets and pay for rental space or vehicles, a business line of credit can help you when you’re in a pinch.

OnDeck is a great option if you are looking for a business line of credit. OnDeck isn’t too strict on credit scores, and it’ll provide you with flexible terms and rates to help you when you need it the most.

5. Fundera - Best for SBA Loans

Small Business Administration (SBA) loans are provided by lenders approved by government entities. The government will guarantee up to 85% of the loan, giving you the freedom to plan for further expansion. There are several transportation grants that you may be able to receive funding from. 

If you’re planning to expand your transportation business into other states in America and you need funding for more fleet and equipment, SBA loans are the way to go. You can use your current track record to facilitate additional funding. 

While Fundera has a vast array of loan options, it’s also an approved SBA lender. It’s more than willing to work with startup businesses, as long as they have a viable business plan in place. If you’re looking to finance new equipment at the same time, you can add this to your application and Fundera will get back to you with a suitable offer.

6. Fora Financial - Best for Merchant Cash Advance

Running a transportation business is not as cut-and-dry as many might think. There can be many months when business is slow but expenses don’t halt during that time. That’s when merchant cash advances offer financial assistance without the need for a traditional loan.

Whether you’re looking to keep your business afloat during difficult times or want to grow and expand into other states, Fora Financial can help you out. With merchant cash advances from Fora, there is no strict payback schedule and the flexibility allows a business to repay its debt in a way that is stress-free.

To qualify for a merchant cash advance from Fora Financial, your business must be operating for at least six months. It must also earn $5,000 in credit card sales a month for advances of up to $500,000.

Recommended Reading: Best Food Truck Loans for 2021

How Much Does it Cost to Open a Transportation Business?

The amount of money you will need to outlay to establish or expand your transportation business will vary according to the sector you plan to focus on. Will you provide general services or concentrate on trucks and trailers? Alternatively, will you be working with two trucks, or will you be dealing with relocation services or construction equipment? Each sector will have its own list of capital and operating budget requirements.  

You could pay anywhere between $50,000 and $5 million for your first year’s financing, which will generally cover the following elements:

  • Vehicles and attachments
  • Purchase inventory
  • Relocation/logistics equipment
  • Drivers and workers
  • Insurance and damages
  • Repairs and maintenance
  • Business registration
  • Traffic fines or late penalties
  • Real estate for a base of operations

To begin with you will need to decide if you wish to lease or purchase your fleet and/or equipment. Some loans only cater to asset acquisition while others will allow you to rent. Leasing long-term may not be financially viable, but it might help you out for the first year or two while you cover your other expenses. 

You’ll also need to consider new traffic laws that are being implemented, which may incur some cost to your business. While it may be hard to plan for these incidents, there are transportation business loans that assist to cover these expenses. 

Recommended Reading: Best Trucking Business Loans for 2021

How to Choose the Best Transportation Business Loans

Now that we’ve looked at the top transportation business loans available, how will you select the best one for your transportation business? The one mistake many entrepreneurs make is thinking that there’s one solution that fits all situations. If you’ve read our guide carefully, you’ll realize that you may need to mix a few loan types in order to get the best results.

You will need to consider how many of your transportation business financial goals your selected loan will meet. It doesn’t help to accept a long, expensive financing solution if it only meets 60% of your goals. You end up running short on funds long before the loan term is over. 

Ensure that you look at the loan requirements before you start applying for loans. While some lenders indicate they don’t worry about track records or credit scores, there may be hidden stipulations that could preclude you from qualifying for financing. Also, you don’t want to be tied to contracts that require you to buy from specific vendors.

Recommended Reading: Best Auto Repair Business Loans for 2021

See Our Additional Guides on Industry-Specific Loans

Bottom Line

Transportation is a lucrative business that brings in millions of dollars annually. However, to break into the market, you’ll need the right equipment, drivers, workers, vehicles, and budgets. You’ll also need the discipline to stick to your business plan. In this detailed guide on transportation business loans we have outlined the top transportation loans currently on the market. Now all you need to do is choose the loan(s) that suit you the most.