The economy is definitely in an upswing, there is no denying that fact. Sales are up, and both individual people and companies are spending more. The economic growth has come with an increased demand for truckers, and fleets of all sizes stand to see a marked increase in revenue during 2018 and beyond. However, the Federal Reserve signaled that interest rates on debt may also see up to three potential increases throughout this year alone. The rate hike may severely impact those with trucking loans on the books.
Existing Trucking Loans
It is almost impossible to launch or grow fleet operations without trucking loans in one form or another. From traditional business loans to equipment financing to get vehicles, trucking loans have become a staple in the industry. While taking on debt through trucking loans to grow a fleet is not news, the impending interest rate hikes are. Higher interest means a tighter cash flow, as more revenue will need to be portioned out to make make regular payments to lenders. Fortunately, there are a couple of solutions fleet owners can take advantage of in order to stay ahead of the game.
Refinancing Trucking Loans
For fleet owners with existing loans, refinancing and consolidation are viable options to avoid rate hikes. Refinancing loans at a fixed interest rate may seem like a smart decision. Most traditional loans come with variable interest rates, which stand to increase along with the announcement from the Federal Reserve. If interest rates increase to the projected points, fleets will be paying more on loans than they have in a decade. A fixed rate from refinancing or debt consolidation would mean fleets would be paying the same amount per month, regardless of what is happening to interest rates elsewhere.
Reducing The Need For Loans
Some fleet owners have been actively trying to reduce the need for debt-based loans while simultaneously increasing cash flow. The method these fleet owners are using is load factoring. Some of the largest fleets still use trucking loans because a large portion of revenue is tied up in unpaid invoices. Load factoring immediately converts invoices to cash, so fleet owners have the revenue to sustain and grow operations, without needing to rely solely on loans, which place debt on the books.
Express Freight Finance is a leader in working capital and factoring services for the trucking industry, throughout North America. Contact our offices today to learn more about how your fleet can move away from loans and dodge the impending interest rate hikes by maximizing your cash flow.