Financial solutions for Courier Services

The funding needs for courier businesses are relatively small. You can call on self-employed couriers with their own vehicle rather than permanent staff. They will be responsible for providing their own bikes and safety equipment, as well as storing and maintaining them.

You could start your courier business from a home office on this basis, with a computer and mobile phones rather than a dedicated radio system. However, most successful courier businesses have a central location for their offices

You will be faced with the costs of creating effective publicity for your business, which can involve everything from colourful protective clothing for your couriers to a professional website supported by social marketing.

You will need insurance. There are specialist brokers that deal in insurance for couriers and light hauliers and you might pay around £2,000 a year for a company with vans as well  as bikes.

Your business could be easy to grow. You simply take on more self-employed riders or drivers as you need them. But at the very least, you will need to provide operating finance until it becomes profitable – and the more you can publicise your business, the greater the chance of success.

Your funding options

Finance solutions for courier services include:

• Startup Funding
• Asset Finance
• Premises Finance
• Operating Finance

Buying or setting up a courier business

Many businesses will start with owner drivers or riders, which can reduce their start-up costs. But remember, branding is important, and you may need distinctive outer clothing and signage.

You will certainly need a website and insurance, and a central location to use as an office.

You will probably also need funding to keep your courier business afloat for the first few months, while you work to bring in business from local firms and individuals.

The first step in securing that funding is to work out just how much you need in a detailed business plan. This will be a vital tool in securing the cash you need, but remember that many lenders are often wary of start-ups. Most prefer to see existing trading records as the basis of their decision-making process, hence a business that has been trading for a year can find it much easier to attract funding.

However, 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.

Asset Finance - providing the equipment you need

If you are not providing vans or cycles, your equipment costs will be minimal. Office equipment and computers, plus mobile phones could be your main needs, but the costs of even these basic items can soon mount up – and you may need them before you have despatched a single package.

Asset Finance solutions let you spread the costs of most types of equipment. They include a range of funding types:

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 – which can allow you to continue to use them, or to sell them on.

Items such as your office equipment may be well-suited to HP.

Lease Finance

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

Leasing may be more appropriate for high cost items such as electronic trackers and navigation equipment that can date quickly.

Contract Hire

If you are ready to make the leap to providing vans, Contract Hire could be the solution. This is another type of Asset Finance arrangement, often used for new or nearly new vehicles. It allows you to budget ahead in confidence and avoid maintenance costs and depreciation.

You set up a contract with a finance company, who will buy the vehicle you need and hire it to you for a fixed period. They will 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 less the estimated value of the vehicle at the end of the agreement. This helps keep your monthly repayments down because 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

Your premises could be your main business cost. You need an ‘operating centre’ to act as a control and despatch hub. The premises could be basic, and simply need to conform to health and safety rules, but they should need to be central for your customers, to allow them to drop packages in.

Of course, any town centre property will be expensive. You may need help to provide the deposit for a lease, perhaps with an unsecured loan.

You could also eventually consider buying premises, with a Commercial Mortgage, which spread the cost of buying over 20 years or more and could reduce your monthly outgoings.

However, 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 opening your doors for your business will mean costs - for business rates, utilities and other overheads. The bills won’t wait until you start to show a profit, but there are a number of ways to provide for these costs.

Borrowing is a simple solution and business loans can 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 loan 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.

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 cost 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 here.

Invoice Finance

Getting a contract for courier services from a large corporate client could be the making of your courier business, but many large organisations can be slow at paying. You will have people to pay and overheads to deal with.

Invoice Finance can provide an answer, allowing you to get paid up to 90% of the value of reach invoice you send as soon as you send it, and the remainder when your client pays.

If means your cashflow can keep pace with the amount of work you are doing, and helps support growth – because you will always be able to take on more work, secure in the knowledge that you will be getting paid, fast.

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 your garage can avoid cashflow problems, and makes it easier for you to budget ahead - and avoid trouble form the taxman.

Find out more about the benefits of Tax Loans.

How we help you capitalise your courier operation

At Rangewell we work across the entire lending industry, and we have finance experts with personal experience in the needs of courier 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, along with any other funding need you have – from both the established lenders, and the new Alternative Funding providers.

From funding for distribution services and courier services to funding for freight services, call us now to see how we can help you raise the finance you need.