Financial solutions for Bus and Coach Operators

Starting a motor coach or bus company could prove lucrative in the right location, but there are some substantial costs to consider, including:

• Drivers - You must use experienced qualified drivers, with PSV licences.
• Licence - You will need a PSV Operators Licence. You need one O-licence per vehicle, and a financial commitment for each one to demonstrate you are of sound financial standing.
• PSV O-licence - You will also need to put yourself through the Transport Manager Certificate of Professional Competence (CPC) to hold a PSV O-licence.
• Depot - You will need a secure depot to operate from, with an inspection pit and full mechanical facilities for maintaining commercial vehicles, along with skilled mechanics.
• Vehicles - Your choice of vehicles will depend on the work you intend to do. For council contracted work, such as school runs there may be restrictions on vehicle age, and you may need low-floor easy access vehicles.
• Luxury costs - The touring end of the market may require luxury with extras such as onboard wifi and toilets, and you will also need to consider the size of your vehicles. Too large will mean increased costs, while going too small could restrict your profitability.
• Running costs - Your vehicles will be heavy on fuel, and consumables like belts, brake shoes and tyres. They will require ongoing maintenance and a hefty VED bill. The total cost of operating each vehicle could be in the region of £2000 a week.

Your funding options

Fortunately, at Rangewell we can provide solutions to your key funding needs, including:

• Vehicle Finance
• Premises Finance
• Operating Finance

Asset Finance  - providing the vehicles you need

Brand new buses currently cost between £70,000 to £120,000 for a single deck and £150,000 for a double-decker, while a luxury coach can easily cost £350,000.

PSV vehicles are often bought secondhand. The cost will vary according to the specification and the age, but as a working vehicle, it may be better to pay more for a vehicle which can offer you a longer working life along with a better return on your investment.

Asset Finance solutions let you spread the costs of your vehicles and other equipment and repay the lender while they are already working for your business. They include a range of funding types, but all can have a major advantage over other types of funding. The finance is secured on the assets themselves - meaning the lender can repossess them if you don’t keep up repayments, reducing the risk to them and consequently the costs to you.

Hire Purchase

Hire Purchase works exactly as it sounds. You ‘hire’ your vehicles until you’ve paid enough to ‘purchase’ them.

Arrangements generally last between 6 and 60 months. You pay a deposit, along with fixed monthly instalments for an agreed term, after which the assets become your property.

With Hire Purchase, you can pay for the equipment you want to use for the long-term. It may be better suited to equipment with a long life, such as office equipment rather than vehicles.

Lease Finance

Leasing gives you flexibility. You are renting the vehicle, or another asset, and can regularly upgrade it as you need to. With some leasing arrangements, you have the option to have maintenance and insurance to be included.

Leasing may be appropriate for high-cost items such new coaches which may otherwise be difficult to afford.

Contract Hire

Contract Hire is another type of Asset Finance arrangement often used for new or nearly new vehicles. This type of Asset Finance lets you work with the latest vehicles, budget ahead in confidence and avoid some of the risks of vehicle ownership – such as maintenance costs and depreciation.

You set up a contract with a finance company who will then buy the vehicle you require, and let you hire it for a fixed period of time and with an agreed mileage. They will be responsible for maintenance, and will simply take back the vehicle at the end of the contract, allowing you to acquire another new one with a new contract.

Payments are calculated on the purchase value of the vehicle, less the estimated value of it at the end of the agreement. This helps to keep your monthly repayments down because the vehicle will be sold on by the finance company. You are, in effect, financing the vehicle only for the time when you are using it. This has the benefit of making it easy to switch to a new vehicle at the end of the agreement.

At Rangewell we can help find funding solutions based on Asset Finance for all types of vehicles and equipment, both new and used.

Funding for your premises

You will need a secure depot and a fully equipped workshop.

It might be possible to lease a suitable facility, but it can be difficult to find suitable premises in a location which is ideal for your business.

If you can find an ideal site, you could also consider buying premises, with a Commercial Mortgage, which will let you spread the cost of buying over 20 years or more and allow you to improve the site to fit your needs. It could also actually reduce your monthly outgoings. Some lenders have a minimum of £75,000 or more for Commercial Mortgages, but there is no set upper limit.

If you already own your premises, taking out a Commercial Mortgage on it might be a cost-effective way to raise funds to use elsewhere in your business.  

Operating costs

Simply operating your business will also mean costs. Staff, fuel, service and parts can easily mean costs of £2000 a vehicle. There are a number of ways to provide for these costs until you start to show a profit.

Business Loans

Borrowing is a simple solution. Business loans may be Secured or Unsecured.

Unsecured loans are like personal loans, but based on the creditworthiness of your business, and don’t involve holding any of your assets as security. Loans are repaid in monthly or quarterly instalments over an agreed term, usually under 5 years.

Modern lenders can provide fast unsecured lending, but you might need to provide a personal guarantee.

You usually can’t borrow more than one month’s turnover without security, and most unsecured loans providers will not lend more than £250,000. For a new business operation, many lenders might only be prepared to offer a secured loan.

Secured loans are ‘secured’ because the lender will need something in the form of security in case you cannot repay the loan. The security in question could be your home or even your business premises.

Providing this security means that the lender can give you longer to repay, and lower interest rates. This means that monthly repayments can be easier to fit in with your cashflow, and it may be possible to borrow large sums of money if you can provide suitable security.

Our lending teams can discuss your needs, and help you find the kind of loan to fit your business needs.

Working Capital Finance

The early days of any business are challenging. As its name suggests, Working Capital Finance is designed to boost the capital available when your bus or coach business is not generating sufficient capital itself. It's often used to provide cash to pay staff and operating costs while business is slow during the early stages or during a period of growth when your cashflow is already stretched. It is usually designed to be repaid in the short- to medium-term, once your business is established and running.

Find out more about Working Capital Finance.

Tax Loans

Tax is an issue for every business. A large quarterly VAT or annual tax demand can cause big problems for your cashflow, especially if it falls at the same time as other costs.

Funding is available to let you spread the cost of your tax demands into affordable monthly payments. This will help ensure that you can avoid cashflow problems, and makes it easier for you to budget ahead - and avoid trouble from the taxman.

Find out about Tax Loans here.

How we help you capitalise your coach or bus operation

At Rangewell we work across the entire lending industry, and we have finance experts with personal experience in the needs of bus and coach operators. This expertise works for you because our team knows the lenders who specialise in the sector. It means that we can help you find the most competitive rates for all types of vehicle finance solutions – from both the established lenders and new Alternative Funding providers.

Call us now to see how we can help you raise the finance you need.