Breaking bank barriers: How small fleets can grow

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By Shefali Kapadia | for The Inside Lane

Have you ever struggled to get a business loan from a bank? You're not alone. Financial institutions often view small trucking fleets as high-risk businesses, and they may be reluctant to loan out money. 

But there are still plenty of ways to grow in a financially sustainable way, and a lot of it comes down to understanding your costs and your niche. We get tips today from Stephanie Winston, the founder of Barbs’ Angel Investing, which is focused on entrepreneurs in the freight trucking industry.

What are the most common financial pitfalls for small business trucking companies?
The most common financial pitfalls are cash flow management, poor financial planning and management, lack of financial literacy and short-term gratification. Most companies have not calculated their cost per mile (CPM), which results in running loads at negative, zero or slim profit. Another common pitfall I see is carriers sourcing all their freight from load boards such as DAT or Truckstop. They put all their eggs in one basket. Diversifying and including direct contracts in your business model will mitigate spot market volatility. 

Why is it so difficult for small fleets to gain access to capital that would help them grow their business?
It’s difficult for small fleets to gain access to capital because of its high-risk market and cash flow management. A lot of banks and financial institutions categorize trucking as high risk and shy away from giving loans. When a trucking company provides its bank statements, it shows clearly the revenue and expenses. With poor cash flow management, instant gratification and high expenses, there are a lot of cases where companies will end their month in the negatives after generating $15,000, which gives financial institutions a perspective to deny capital.

What's your No. 1 piece of advice to trucking owners to sustain growth, even in a tough freight market?

My advice to trucking owners to sustain growth in a tough market is to understand your operating costs, rent or lease your equipment, think long-term, grow strategically, find your niche, and have a solid plan and foundation. Think deeply of where you are and where you’d like to be. Write your plan and all the steps you’d need to get there. Utilize technology to save time and automate processes. Instead of being open to all freight, find something that interests you and attracts you. For example, if you love cars, maybe focus on car hauling. If you love strawberries, maybe focus strictly on hauling strawberries. There’s a famous saying, "There’s riches in the niches." Focus on one or two things and master it and execute it.

Thinking long-term and knowing your costs will allow you to think of your trucks as an asset investment. For example, real estate investors may only see $400/month in passive income for one property, after their loans and expenses are paid, until the loan is paid off to recoup more of the rent for passive income. It starts to make sense long term after the fifth property. They don’t rely on the first property, they reinvest into more and think long term. Think as an investor.