Finance for Haulage Services: Helping your busieness go further

Whether you run a road haulage firm, freight company or public transport service or the logistics arm of a larger business, you know how quickly the costs of buying and operating your vans and trucks add up.

The costs don’t stop there. With rising fuel prices and high operational costs, it can be difficult to maintain a healthy cashflow. In addition to this, EC legislation continues to put more pressure on the industry to comply with, for example, more stringent emission levels under Euro 6 legislation.

Staying in the haulage business means keeping every cost under control.

The costs you face include:

• Fuel costs including duty -  accounting for about a quarter of all operating costs
• Road and bridge tolls, and city congestion charges
• UK regulation and compliance costs
• Staff costs – the average salary is around £22k, and demand for qualified drivers is pushing wage costs upwards
• Vehicle excise duty (VED) Vehicle-related costs
• HGV insurance costs
• HGVs purchase and leasing costs
• Slow payment of sales invoices
• Trailer hire

You also face almost entirely unregulated competition from Eastern Europe with lower fuel and labour costs.

At Rangewell we can help you find solutions to all your costs.

Your funding options

Finance solutions for the haulage industry include:

• Asset Finance
• Invoice Finance
• Premises Finance
• Secured and Unsecured Loans
• Tax Loans
• Working Capital Finance
• Funding for growth

Asset Finance - providing the vehicles you need

Asset Finance solutions let a lender finance your vehicle. You spread the costs and repay the lender while your vehicles are already working for your business. Asset Finance includes a range of funding solutions, all designed to help you acquire the vehicles that keep you on the road to success.

Of course, it is simple enough to get finance when you buy a vehicle. But the fact is that dealer finance could be a costly option.

Truck and van dealers may offer a bewildering variety of finance plans. Some even offer 0% finance to help them close a deal, but they may hide the real costs. The deals they offer may be designed to maximise their profits, and often mean that the purchase price is inflated to pay for the finance.

You could be better off asking for their best price for cash and getting finance from a specialist lender. Your overall costs and monthly payments could both be reduced.

Asset Finance solutions include:

Hire Purchase

Hire Purchase works exactly as it sounds. You ‘hire’ the vehicle until you’ve paid enough to ‘purchase’ it and become its owner.

With HP, you can pay for the equipment you want for the long-term with fixed monthly repayments over up to 5 years, letting you manage your cashflow better. Arrangements generally last between 12 and 72 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 operate it, or to sell it on.

You’ll normally have fixed monthly repayments so you can manage cashflow during the term.

An alternative is the ‘balloon’ payment. This lets you make smaller monthly repayments during the term of the arrangement, with a final, much larger payment (the balloon) at the end.  This can reduce monthly outgoings, and allow you to return the vehicle to avoid the balloon payment.

Lease Finance

Leasing gives you flexibility. You can regularly upgrade your vehicles and with some leasing arrangements you have the option to own them at the end of the term, or simply return them and take out another arrangement on a new vehicle.

You can also decide whether you want maintenance and insurance to be included and whether you need the truck for its whole working life or a shorter, agreed period.

Contract Hire

Contract Hire is another type of Asset Finance arrangement often used for 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 who will buy the vehicle you need and let you hire it for a fixed period, and 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. It could be appropriate if a prestige vehicle is required.

Asset Refinance - Making existing payments easier

If an existing finance arrangement is causing problems, or if you want to redirect cash elsewhere in your business, we may be able to help find a refinance option. A lender will pay off what you owe under your original agreement and set up a new finance arrangement.

This can mean reduced repayments, spread out over a longer term. It could also allow you to release a substantial cash lump sum if you wished to refinance a large fleet.

Find out more about Asset Finance and Asset Refinance solutions.

Invoice Finance – helping your deal with cashflow issues

The haulage industry bears the brunt of difficulties anywhere in the economy. It can face real problems when customers take longer to pay and, in some cases, fail to pay at all.

Waiting 30 days to get paid is bad enough, but some customers expect terms of 90 days from their hauliers. Having to keep operating for that time without money coming in can cause major cash flow issues. Wages, fuel and finance still need to be paid even if the revenues are not coming in.

Invoice Finance for the haulage and transport industries can be a valuable way of freeing up cash sitting in unpaid invoices to help you cover those essential overheads.

It means you can release cash tied up in invoices rather than wait for 90 days for payment to come in. Rather than having to wait to be paid, it lets you take up to 90% of each due payment immediately. The remainder will be paid to you, minus any fees, once the customer settles the outstanding balance.

It's an ongoing credit facility that protects you against late payment – because it ensures you get paid fast even when customers are slow.

Invoice Finance can help power your business growth. If you have to wait to get paid, a new customer can actually be a problem – because you don’t have the cash to for the extra vehicles staff and fuel. With Invoice Finance, you know the money will be in your bank almost as soon as you invoice. The more work you do, the more cash you will have to call on.

There are several types of Invoice Finance.

Many providers offer the option of Bad Debt Protection as part of their service, which means even if your customer goes bankrupt or for other reasons fails to pay, you don’t lose out.

Find out more about Invoice Finance.

Funding for premises

Your haulage business will need a secure depot and may need a workshop and warehousing facilities as well.

Leasing a suitable space may be the most versatile solution, but prices will vary across the country. Commercial property owners don’t like space being vacant, so you might be able to negotiate a good rate. However, you may need to borrow for the deposit on a long-term lease. An Unsecured business loan could help you raise the cash.

Alternatively, you might want to consider using a Commercial Mortgage to buy premises outright. Because they can spread the costs over 20 years or more, Commercial Mortgages may sometimes be arranged at monthly costs similar to a lease, and help you buy an appreciating asset for your business. You may need to provide a deposit of around 40%, and it is uneconomical to borrow less than £50,000, but there is no set upper limit.

Commercial Property Finance is arranged on an individual basis. Get our help in finding the most competitive lender.

Buying an existing haulage business

Buying an existing haulage business with a fleet and established contracts could offer immediate returns. Knowing the kinds of profit that can be generated will help convince potential lenders that your plans are viable. A Secured Loan could help you to borrow the large sums required for a buy in our buy out of an existing business.  You might also consider ‘Jigsaw’ Funding. This is a bespoke finance package, made up of a number of loan types, such as a Commercial Mortgage for the premises, with other loans to cover goodwill, and Asset Finance for the equipment.

Contact us to find out more about funding for buy-ins and buyouts.

Operating costs

Operating your business will also mean costs – for staff, fuel tax and other overheads - until you start to show a profit. To help, there are a number of ways to provide for these costs.

Borrowing is a simple solution for finance challenges, and 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 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 require security in case you cannot pay the loan back. This could be your home, or your business premises or even your fleet.

You can have longer to repay, and enjoy lower interest rates. This means that monthly repayments can be lower and easier to fit in with your cashflow, and it may be possible to borrow larger 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.

Tax Loans

Tax is an issue for every business. A large quarterly VAT or annual tax demand can cause problems for your cash flow, 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 business can avoid cash flow problems, and makes it easier for you to budget ahead in confidence.

Benefits of a Tax Loan can include:

• Better control of cash flow
• Fixed monthly payments
• Quick and simple to arrange
• Avoids issues with HMRC and potential penalties

Find out about Tax Loans.

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 to your business when it 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 haulage business is established and has a healthy monthly turnover.

Find out about Working Capital Finance.

Funding for growth

Once your haulage business has started to establish itself, you may need to consider growth. Taking on more drivers and expanding your fleet to take on more contracts can help boost your profits.

Additional investment will be required. This can be challenging if your business does not have the long trading history and profit record that lenders usually require. However, there are lenders who take a more enlightened view and may be able to can help.

Our finance experts can help solve your Growth Capital needs.

How we help you capitalise your haulage business

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

Their expertise works for you. Our team knows the lenders who specialise in vehicle finance, and those who understand your business 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.

We put this knowledge to work for you, finding the most competitive deals for the vehicles you operate - from a single van to funding for freight services or truck finance for your complete HVG fleet - and the most appropriate forms of finance for your other business needs.