Smaller trucking companies have received a lot of attention from industry news outlets over the past few years. During the high-demand period of 2018, smaller trucking companies helped to offset the burden larger carriers were experiencing from shippers calling for capacity loads.
In 2019, while the industry slowed back to a normal pace, smaller trucking companies still saw growth because they were able to focus on local markets and make those “last mile” deliveries that weren’t on larger carrier routes.
In 2020, a number of smaller trucking companies are looking to expand into new markets but want to avoid mistakes by overextending themselves.
New Markets Require New Research
Expanding into new markets requires research to figure out when, where, and how trucking companies can grow. Is expansion going to mean tapping clients in a new location, or does it mean transporting products from a wider range of industries?
Is your trucking company expanding its radius? Does growth mean moving to a larger facility and acquiring more equipment? When will the expansion take place? And the biggest question is: how much will all of this cost?
Smaller trucking companies have to keep a more delicate hold on finances than their larger counterparts, so growth is something that needs to be explored in detail before it is implemented.
Financing Expansion for Smaller Trucking Companies
Another challenge smaller trucking companies have to contend with is how to finance their expansion into new markets. Taking on debt from large loans is a risk on multiple fronts. First, debt places a strain on cash flow because more revenue ends up being placed aside to cover not only regular overhead but also to pay down the balance on the loan.
Second, taking out a loan now does not guarantee that interest rates will not rise in the near future, which will inflate monthly payments. Third, loans lower business credit ratings, which means getting further financing after expansion becomes more challenging.
To resolve this, smaller trucking companies will finance expansion from within. Instead of taking out loans, smaller trucking companies use freight factoring to turn unpaid receivables into cash to build up reserves, so they can expand into new markets without taking on unnecessary debt.
At Express Freight Finance, we specialize in freight factoring for smaller trucks of all sizes. We offer fast turnaround, so smaller trucking companies can access funding from their receivables within 24 hours. If you are looking to take your trucking company to the next level by expanding into new markets, contact the experts at Express Freight Finance today.
