How Business Credit Can Create Roadblocks For Trucking Companies

To remain front and center in the highly competitive trucking industry, owners should be able to organize a well-run business with cutting edge solutions. They must prioritize the movement of cargo, in a well maintained/regulated fleet, with the help of the best human capital and technology, while keeping up with the fast-paced changing atmosphere of the industry.

This is quite a lot to juggle and the trucking industry has some of the highest barriers to entry due to financial and bureaucratic obstacles that can make things complicated and costly for new and seasoned entrepreneurs. Loans, lines of credit, and leases ultimately become an attractive option to fund start-up costs, operations, improve technology, and to remain a healthy contender in this competitive landscape.

The trucking industry faces many regulatory obstacles

Factor in the expenses that are required of trucking companies to operate legally.

  • Register with The Federal Motor Carrier Safety Administration (FMCSA).
  • Make sure you have an up to date USDOT number and a Motor Carrier Authority (MC) number.
  • All drivers must have a Commercial Driver’s License (CDL) with the appropriate classification (A, B, or C) that authorizes them to operate vehicles over a specific weight.
  • The Heavy Vehicle Use Tax for any vehicles transporting over 55,000 lbs across public highways.
  • There are also various other state and federal regulations that reign over the industry.

For instance, companies must adhere to the hours of service (HOS) regulations that limit the number of daily and weekly hours that a commercial vehicle driver can be behind the wheel. This was an effort to prevent accidents caused by driver fatigue, but also impacts the speed of freight transport. If logistics are not planned with these HOS hours considered, companies may be unable to fulfill the time constraints detailed in their contract which can end up causing injury to their reputation, breach of contract, and ultimately loss of profits.

Let’s face it:  In our technology driven world all businesses need to stay on the cutting edge to remain relevant, attractive, and profitable.  So how can trucking companies be proactive in protecting themselves and remain ready for creditor, vendor, bids, and loan/lease approvals in case they need them for multi purposes at any time?

Business credit has a direct impact on trucking companies

Since trucking companies often operate through bidding on accounts and entering into contracts, businesses must present a strong financial reputation and honor those contracts to earn revenue and keep existing accounts. They also need to stay current on technology that improves their service while saving money for their potential partners and clients or they will see their business slipping away to those that can.  To do this they must either have cash at hand to stay up to date or gain approvals on financing to purchase the latest software and technology.

As we know, it is common practice for lenders, vendors, creditors, and partners to review the bidder’s or borrower’s business credit as well as other information to learn the potential risk of partnering with the firm.

Most companies are never informed when a third party reviews their business credit since there are NO regulations that require authorization.  Anyone can pull credit, review it, and make decisions about your firm that could cause a negative consequence and loss of potential or existing profits.  Taking the initiative to begin building their business credit profiles as soon as they register their business and maintaining positive payment history daily or improving challenged credit can help to maintain a good impression to the viewer.

When trucking companies take this often-over-looked step, they are ensuring the ability to reflect financially capable through the credit aspect of qualification.  This can do a great deal in making it easier on themselves to begin the process of placing bids for projects and making the process of loan approval more graceful and less costly.  All these steps allow them to gain success and ultimately greater profits.

By having strong company credit trucking companies can:

  1. Keep up with the latest changes in technology

    Let’s face it:  In our technology driven world all businesses need to stay on the cutting edge to remain relevant, attractive, and profitable.  So how can trucking companies be proactive in protecting themselves and remain ready for creditor, vendor, bids, and loan/lease approvals in case they need them for multi purposes at any time?

    The commercial transportation industry doesn’t have much of a choice – keep up with the latest technology or don’t keep up at all.

    Some tech that trucking companies need to consider: Location detection, driver management & tracking systems, cloud-based computer programs, logistics solutions, and automated fleet management – to name a few.

    In fact, new customers will often look for companies that are utilizing the latest technology and streamlining internal operations as part of their bid review process. As you can imagine, this new technology comes with a heavy price tag, since these purchases are intended to enhance the business and are a long-term investment companies will either need enough operational cash to purchase the equipment or look to a business line of credit or loan to afford the upgrade.

  2. Find affordable insurance policies

    Firms need a lot of coverage – they must have up-to-date and strong policies to protect their human and physical capital/assets. Some insurance policies that are a common necessity in the trucking industry are: Cargo, fleet, liability, bobtail, workers compensation, and medical insurance.

    Commercial insurance companies will often look at credit profiles in order to predict the chances that a particular company or individual will file a claim. If you’re business credit is poor or challenged, you will be considered more likely to file a claim and therefore a higher risk. If this is the case your premiums will be much more expensive. Many companies do not even realize they could be saving on their premiums if their business credit improved.

  3. Find affordable loans/leases

    For financing equipment and/or obtain extra revenue for operational expenses. To qualify for a line of credit, loan, or lease, lenders will want to look at the borrower’s business and personal credit reports in order to decipher the risk of default and either decline the loan or pinpoint suitable pricing for the borrower. Analyzing past payment behavior on credit helps predict future behavior.

    Some trucking companies opt to lease their commercial fleet while others choose to purchase or finance their fleet. Either way, it’s expensive and time consuming. No matter what financing option they go with, their business (and possibly personal) credit will be reviewed to determine their interest rate. If a company has properly managed their credit, they will save tens-of-thousands of dollars in interest over the course of their lease/loan.

    The lender may use the FICO SBSS credit score in order to measure risk – this score uses the principals personal FICO score plus the company’s credit information to tabulate a score ranging from 0 – 300.

  4. Gain an edge against the competition

    To win bids and stand out from the heavy competition, trucking companies want to present every aspect of their business in the best light.

    Many successful trucking companies post their DUNs # on their website so that when prospective clients/accounts look at their site, they can stand out as a transparent and prepared firm.

  5. Land partnerships and payment terms

    With suppliers or other companies where your synergies align. To be offered favorable payment terms, businesses must be able to provide a record of responsible payment habits.

Consider 5 different business credit reports

In the trucking industry, companies should be conscious of 5 different credit reporting agencies:

  • Dun & Bradstreet
  • Experian
  • Equifax
  • Trans Credit
  • Ansonia

Ansonia and Trans Credit are specifically relevant to the transportation and trucking industry.

The grandiose expenses that trucking industry faces requires that they can leverage strong financial and credit reports that will make them a solid contender on a rough playing field. By taking the initiative to build and manage healthy business credit from the start, it allows firms to eliminate the headache of dealing with higher interest rates and denials come the time they are ready to apply for credit.

North Shore Advisory a Concierge Program for building business credit that is done in-house by our team of credit experts. We also offer a Business Credit Repair program for companies with established profiles who need damaging information removed. We will customize our services to fit the needs of your unique business. Reach out to us today for a free consultation.


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