Small fleets are the backbone of the trucking industry. There are over 500,000 carriers with six trucks or less, accounting for 86% of all carriers in the US. In fact, over 95% of all carriers have fewer than 20 trucks. Smaller fleets boast the personalized service they offer to set themselves apart from the Goliaths of the industry.
Sometimes fleets reach a point where it makes the most sense for them to grow their outfit. There are many benefits to expanding a fleet when the time is right. Having more trucks means that money is still coming in, even if one of your trucks is sidelined. Larger fleets have a higher profile, which can make it easier to attract drivers. Increasing your fleet size can even help your business qualify for better bank rates.
There are two types of expansion a small trucking fleet can make: physical or monetary. A physical expansion involves adding more trucks, drivers or both. Monetary expansions come in the form of higher quality jobs, often requiring modern equipment or technology.
Signs You’re Ready to Expand
Expanding your fleet can make sense in a variety of situations. One of the most common and easy to recognize is when you’re turning down work. This can be especially frustrating when the loads you’re turning down are from a current customer. No one wants to lose a valuable client because they aren’t able to meet their needs anymore. Increasing the number of trucks to meet the needs of a client can help strengthen the relationship and, in turn, allow you to charge higher rates.
Adding trucks to a fleet can also help mitigate maintenance expenses. A one-truck operation loses its ability to make money whenever that truck is down. Larger fleets are able to cover repair costs for down units with the trucks that are still on the road.
Instead of increasing the number of trucks in a fleet, small trucking companies may look to upgrade or expand their equipment. Purchasing new trucks can lower overhead costs like fuel and maintenance, while also attracting drivers. Additions like specialized trailers can help fleets take on different loads, such as refrigerated or oversized shipments.
So, you’ve decided that it’s time for your business to grow. Now what? Expansion comes at a price but there are several ways to get the funds needed to grow. Whether you’re looking to purchase new types of trucks, new tech or hire new drivers, there are funding options available for you.
If you’re looking to access cash without taking on debt, factoring is the way to go. Factoring is not a loan; it is just a quick payment for the work you’ve already done. Unlike loans, your credit history is almost irrelevant when it comes to getting approved. Factoring companies base your approval on the creditworthiness of your clients, not you.
Fleet size is also unimportant to factors. Many one-truck operations utilize factoring to access funds every day. It doesn’t matter what type of fleet you run, there’s factoring available for:
- Freight Brokers
- Hot shot truckers
- Dump truck drivers
- Auto transporters
- And many others!
If you’re looking to finance beyond the value of your outstanding invoices, a loan could be right for you. Just keep in mind that a loan is a debt incurred by your business and your credit will come into play.
The Small Business Administration (SBA) offers government backed loans for small businesses. SBA loans are often available for businesses that don’t qualify for conventional loans. Microloans are also available for businesses that need less than $50,000 for everything from equipment to supplies.
Banks offer different types of loans for trucking businesses. There are short and medium-term installment loans that vary in length from one year (short-term) to five years (medium-term). These loans are paid back monthly over the life of the loan.
A business line of credit is another financing option. With a line of credit, borrowers can withdraw money as needed and pay back the interest and fees for what they borrow. The lender will set the borrowing limit when the line of credit originates.
Getting New Trucks
When it comes to getting new trucks for your fleet, there are two options, buying or leasing.
Banks often offer equipment financing that is meant specifically for buying a truck. With an equipment loan, monthly payments are made on the principal and interest. Once the payments are complete, the vehicle is yours! This is a great route to take if you’re looking to keep the vehicle for years after purchasing it.
Leasing a truck is another option to consider. Leasing is basically like renting the truck from the lender. The truck is yours to use while you make the monthly payments agreed to in the lease contract, the truck is yours to use. Unlike buying a truck, when a lease ends the lender keeps the vehicle. In some cases, you may be able to pay a remaining balance and own it outright.
Despite lower monthly payments, leases usually end up being more expensive in the long run because you don’t own the vehicle at the end. However, if you’re planning on always upgrading to the latest models in the future, leasing can make sense. Consider what your long-term plans when deciding between a purchase or lease.
Bringing on New Drivers
Adding drivers to your fleet can prove to be difficult. The industry is facing a massive driver shortage that shows no signs of slowing down. That doesn’t mean you should just give up, though. Here are a few tips to help bring on new drivers.
Look for Non-traditional Drivers
Under 10% of truckers are female. That means half the population is extremely underrepresented in the industry. Market your job searches towards women and you could find a lot of success in filling seats with quality drivers.
Expand Your Job Search Platforms
In addition to job boards, be sure to post openings on social media and Craigslist. There are millions of users on Facebook every day, many of whom could be ideal candidates. Craigslist offers a free platform to reach people in your area, so make use of it!
Increase Driver Pay
This may be a tough one to do, but its hard to beat higher pay when it comes to attracting workers. This could be done either through guaranteed pay or a signing bonus.
Adding a great benefit package will not only help attract drivers, but it will also help keep them. Things like 401(k)’s, paid time off and health insurance can go a long way to bringing in quality drivers. In an industry where the median age is 49, retirement and insurance benefits are must-haves.
Getting Higher Quality Jobs
Higher quality trucking jobs usually require special equipment or licensing. For example, jobs hauling tanker trailers have high pay but require a special endorsement on your license. An “N” endorsement covers regular tankers, but if the liquid cargo is hazardous an “X” endorsement is required. For non-liquid hazmat cargo, a hazardous materials endorsement (HME) will do.
For higher paying jobs that don’t require extra endorsements, consider specialty car hauling. Investing in an enclosed car hauling trailer can open up opportunities. Collectors are willing to pay top dollar to drivers who can safely transport and deliver their vintage and exotic cars.