How To Obtain A Small Business Loan For Your Hot Shot Trucking Company

Having access to capital will always be extremely critical for any company, but more so for companies that are equipment intensive such as a trucking company.  This doesn’t necessarily mean that you have to use up all of your loans and lines of credit, however, being able to tap into those resources at opportune times can mean the difference between growth of your company and the demise of your company.

This is not to sound extreme, utilizing capital properly can get you out of a lul or plateau that you may have been stuck at for some time.  By accessing those funds, you can purchase necessary equipment, invest in more talented personnel or rent out more office space to help you grow.  In this post we hope to lay out a framework you can use to properly position yourself to get a small business loan for your hotshot trucking company.

Draft a business plan

It’s so extremely important to put your thoughts down onto paper, if you can’t articulate properly the path you’ll be taking your company then it’s highly unlikely that any financial institution will want to invest in your or your company.  This is your time to show them that you’re a serious business owner whose goal is to create a thriving empire. Banks and lenders don’t want to give their assets to someone who isn’t committed, nor to someone who doesn’t have a decisive path to success in their business.

If you’re looking for help in writing a business plan then you can visit the SBAs website as another resource.  To create a strong business plan you’ll want to get extremely clear and detailed about the fundamentals of your business.   Where do you envision it going in the first 1-5 years? Where do you plan on investing your money to create measurable growth in the company?  How long will you reasonably take to achieve profitability? To write a great business plan for your hotshot trucking company you’ll want to know all your numbers backwards and forward so much so, it’s been said “to write a perfect plan, you must know your company, your products, your competition and the market intimately”

Legalize your business

Imagine walking into a bank and asking for a loan but telling them that you weren’t incorporated or that you didn’t have any type of a legal entity structure other than a sole proprietorship.  To not incorporate is an amateur move and it means that you don’t take business seriously. It would be extremely difficult to get a small business loan for your hotshot trucking company because loans are taken out under a company’s production merit, though you may have to back a loan or line of credit using your personal information.   

Incorporating your business tells a bank that you’re making the right moves.  You also must be incorporated to get a bank account under the business name. Incorporating or forming an LLC varies from company to company so if you have questions about which is right for you then you should connect with a local accountant for advice.  They can likely help you with the process itself, though doing it yourself is not difficult at all and will save you money.

What is the purpose of your loan

This is where you need to get extremely clear with the reason for your loan, simply wanting extra cash “just in case” something happens will not suffice.  Itemize all the purchases you will make, the impact it will have on your cash flow and the benefits it will create for your company.  

The numbers don’t have to play out exactly the way you outline them, but being able to communicate your projections on paper will go a long way.  It would be a very good practice to outline how the extra availability of cash would produce a favorable Return on Investment (ROI) for your company, and you’ll also want to outline how the investment will produce enough cash flow to service the loan.  Being as detailed as possible shows that you understand your business and that your investment will indeed pay off.

Do you qualify?

What’s your credit score?

Established businesses do have their own “credit score” though it is not measured the same way or through the same entities that your personal score is, however, if you’re a brand new hotshot trucking company then you may have to rely on the merits of your personal credit score to get your first few rounds of funding established.  Your credit score is a direct reflection of your ability to repay a loan that was issued, so keeping your score as high as possible is extremely important when soliciting loans.  

If you think you may need help with increasing your credit score then we recommend using Fundwise Capital who has a great team of experts to guide you through the process.  Once your score is at a point where you can obtain loans and lines of credit, they can also help you with that process.

How long have you been in business?

Being in business helps in many ways, not to say that start-ups cannot obtain loans and lines of credit because that’s absolutely not true, but if you’ve been in business for a few years then use that to your advantage.  The sad truth is that about 50% of all hotshot companies won’t even last a full 12 months (oftentimes much less), so beating that statistic tells a lot about you and your company, but you also have a lot of data to work with.  Use your numbers to paint a strong picture about why your loan would really help out your company. You also have a large network of contacts that you’ve been, expand on why those relationships would be instrumental in your growth.

Consider personal loans

If you know your business and your numbers, and you’re convinced that obtaining a loan or line of credit will positively impact your business then do whatever you can to get reasonable loans.  Fundwise Capital can help you get personal lines of credit with 0% financing and potentially even longer term loans to help you add trucks to your fleet.

Put together your supporting documents

To get qualified for a loan you’re going to want to gather up all your supporting documentation to submit along with the application itself.  Below is a list of supporting material that most loans and lines of credit require:

  • Bank statements
  • Tax returns
  • Articles of incorporation
  • Business licenses and permits
  • Employer Identification Number (EIN)
  • Financial statements
  • Collateral
  • Business plan

Put together a list of the equipment needed

Again, preparedness is everything when trying to obtain a loan for your trucking company.  Put together a list of all your assets and their values. Do you have loans against them or are they free and clear?  Not only will this show the lender that you’re able to repay your loans, but it shows them the potential for collateral which can make them much more comfortable in issuing a loan.  

In addition, outline in detail the equipment that you’re looking to purchase.  Itemize each one by stating the purchase price, an estimated monthly repayment on the loan, how much it would cost for maintenance and repairs and the revenue you expect to receive from the additional equipment.