Financial solutions for Taxi Services

Statistics from the Department for Transport show that there around 70,000 taxis and private hire vehicles in the UK. Taxi use has also steadily increased, with around a third of the public using a taxi at least once a month.

Hackney Carriage taxis (black cabs) can pick up people off the street without a booking. They are highly regulated, with fares controlled and numbers restricted by local authorities.

Private hire vehicles, or minicabs, must have a prior booking when picking up passengers and are usually controlled by a radio link from a central office. Minicab firms must hold a private hire operator license before they can accept bookings.

Setting up as a Black Cab or mincab operator could fill a major need - and be a lucrative business.

Many private hire drivers are self-employed owner drivers and pay a minicab company a circuit fee for taking the bookings and scheduling the work. However, some cab firms own the vehicles and either hire them to drivers or take on drivers as employees or contractors.

The costs involved in starting a taxi or private car hire company can be high if you own your own vehicles, but at Rangewell we can help you find ways to raise the funds you need.

Your funding options

Finance solutions for garage services businesses include:

• Startup Funding
• Asset Finance
• Premises Finance
• Merchant Cash Advance

Buying or setting up a taxi or private car hire business

Rather than buying a fleet of vehicles and then finding drivers to work them, many businesses will start with owner drivers, which can reduce their startup costs.

However, it will still be necessary to fund the radio or computer link to the cars, along with insurance and licences, and premises for the control team. More than one control operator will be required, as the service may need to run around the clock.

Borrowing the necessary funding can be a challenge, as many lenders are often wary of startups. Most prefer to see existing trading records as the basis for their decision-making process.

At Rangewell we know lenders who are able to take a more positive approach and can often help arrange funding for start-up ventures, based on solutions such as Secured or Unsecured Loans.

We can also find solutions if you want to buy an existing business. Although the costs may be much higher than those required for a start-up, the ability to show accounts which demonstrate profitability can help secure the finance you need. One solution for acquiring a business with existing assets is a ‘jigsaw’ finance deal, which uses a variety of funding types to  provide the most cost effective funding for each aspect of your finance needs.

Asset Finance  - providing the equipment you need

Brand new black cabs currently cost £25,000 for a manual and £27,000 for an automatic. Taximeters are obligatory for Hackney Carriages and cost around £150-£300, although it is possible to rent them out on a monthly or yearly basis.

Private Hire vehicles are often bought secondhand. The cost of a four-door saloon will vary according to the marque and the age but, as a working vehicle, it may be better to expect to pay more for a low mileage car which can offer a longer working life and return on investment.

You will also need a control system. Many cab companies now have Global Positioning Systems (GPS) so vehicles can be tracked and controllers can co-ordinate the jobs and vehicles. Some have full data so that the job details are transmitted to the cars and can appear on the driver's smartphone.

Asset Finance solutions let you spread the costs of your vehicles and 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. Because the finance is secured on the assets themselves - meaning the lender can take them and sell them if you don’t keep up repayments - the risk to the lender is reduced. This mean that the interest rate they charge you can be reduced with it, cutting your monthly costs.

Hire Purchase

Hire Purchase works exactly as it sounds. You ‘hire’ the equipment until you’ve paid enough to ‘purchase’ it.

With HP, you can pay for the equipment you want for the long term with fixed monthly repayments, letting you manage your cashflow better. Arrangements generally last between 6 and 60 months. You pay a deposit plus fixed monthly instalments for the agreed term, after which the assets become yours.

Items such as office equipment for your taxi base may be well suited to HP

Lease Finance

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

Leasing may be appropriate for high cost items such as electronic equipment, and particularly for your radio system.

Contract Hire

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

You set up a contract with a finance company which will buy the vehicle you need, and let you hire it for a fixed period, with an agreed mileage. They will be responsible for maintenance, and will simply repossess 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 less the estimated value of the vehicle at the end of the agreement. This helps 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

Many entrepreneurs setting up their own Private Hire firm tend to operate out of their homes. National regulations state you must identify an ‘operating centre’, which can be any premises that conform to health and safety rules. Some authorities send inspectors to the property as a part of rubber-stamping your application.

A step up from a home-based control centre is a cab office close to your main customer base and easily accessible for customers who wish to walk in and make bookings, rather than call. A Private Hire office in a town centre, close to pubs and nightclubs will attract late night customers as well as passing trade during the day.

Of course, town centre property can be expensive. You may need help to provide the deposit for a lease, perhaps with an Unsecured Loan.

You could also consider buying premises, with a Commercial Mortgage, which spread the cost of buying over 20 years or more, and could reduce your monthly outgoings. Commercial Property Finance is arranged on an individual basis. Some lenders have a minimum of £75,000 or more, 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 – for staff, utilities and other overheads - until you start to show a profit. Fortunately, there are a number of ways to provide for these costs.

Borrowing is a simple solution and business loans may be secured or unsecured.

Unsecured Loans

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

Secured Loans are ‘secured’ because the lender will require security in case you cannot pay the loan back. This could be your home, or 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.

Merchant Cash Advance

Customers are increasingly paying for their ride with a credit or debit card.

Merchant Cash Advance or MCA is an innovative approach to raising funds based on your merchants account you use to accept card payments.

An MCA is not a loan. It is actually an advance based on your future revenues from credit card sales, the funds flowing through your merchant account.

It is repaid  - along with fees - by a percentage of every card transaction your business makes. Unlike a loan, an MCA makes no interest charges, just a fixed fee that you know upfront. A small business can apply for an MCA and have an advance deposited in a matter of days, ideal if you have a cash shortfall or an unexpected expense.

Find out more about Merchant Capital Advances.

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 cab 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 about Working Capital Finance.

Tax Loans

Tax is an issue for every business. A large quarterly VAT or annual tax demand can cause problems for your cashflow, particularly when 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 more about Tax Loans.

How we help you capitalise your taxi or private hire car operation

At Rangewell we work across the entire lending industry, and we have finance experts with personal experience in the needs of cab operators.

This expertise works for you. 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 the new Alternative Funding providers.

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