factoring company

Let’s be realistic — according to the U.S. Small Business Administration (SBA), 20 percent of small business loans are denied because of poor business credit or lack thereof. Not surprisingly, about 19 percent of Americans have a personal FICO score under 600 as well, per data from Experian. That means about one-in-five aren’t likely to get the financing they need from a bank to start a trucking business and keep their wheels on the highway. It sounds grim, but if that describes you, you still have options.

Where Do Other Businesses Get Their Money?

Additional research from the SBA shows that 57 percent of business owners use their personal funds when starting up a company and a quarter have no startup capital at all. That’s not really realistic when you’re getting into trucking where your startup costs can run anywhere from $6,000 to $15,000, according to Keep Truckin, and that doesn’t include your equipment. Expansion proves just as difficult for small businesses, with 57 percent not expanding and 22 percent leveraging their personal savings.

In other words, most other businesses are funded by the owner’s own cash, but chances are, if you don’t have great credit, you probably aren’t sitting on a stack of cash to start or grow your trucking company either.

Alternative Lending is Key for Businesses with Bad Credit and No Cash

People sometimes get nervous when the phrase “alternative lending” comes up, but it’s not as odd as it sounds. Alternative lending is any kind of lending that doesn’t come from a traditional bank. Solutions like peer-to-peer lending and crowdfunding fit into this bracket. The problem is, options like crowdfunding tend to be more ideal when you’ve got a product for sale and most peer-to-peer marketplaces are still looking for good credit.

Increase Working Capital with Invoice Factoring

Once you’re up and running, the next challenge typically becomes the long waits between completing work and getting paid. Many entrepreneurs only bill once a month as-is, and then they give their clients 30, 60 or 90 days or more to pay up. Think about that for just a moment. It’s like giving your clients an interest-free loan for months at a time. Many feel they need to offer this as a way to attract business or simply because that’s the way they’ve seen it done before, but in the meantime, there’s fuel to buy, emergency expenses, and payroll, too. Even if you’re an owner-operator with no employees, you deserve to be paid too, don’t you?

The good news is, you can shorten the time from work to pay by selling your unpaid invoices to a factoring company. The factoring company doesn’t care what your credit is like, but they will perform diligence checks on your clients. With cash in hand, you can cover whatever bills need to be covered, and there’s no need to pay anything back because it’s not a loan.

percent APR, and you can still qualify if you’re a startup or have been struggling with your credit.

Leverage Freebies and Low-Cost Services

Look for free load boards, fuel discount cards, and other ways to save cash. If you’re a client of Interstate Capital, ask your account manager for details about all the benefits you qualify for.

Build Your Credit

It’s possible to run a trucking company with bad credit, but your best bet in the long run is to improve your credit score. Banks will usually be looking at your personal score, but you can build up personal credit and business credit at the same time to cover all the bases. Bear in mind, it usually takes a minimum of one year to bounce back, though it could take several if you’re clawing your way back up from something like a bankruptcy.

Learn What Influences Credit Scores

According to Experian, there are seven primary factors that influence credit scores.

  1. Payment history
  2. Credit utilization ratio
  3. Total debt
  4. Having a mixture of credit account types
  5. Age of credit accounts
  6. Hard inquiries on your credit/ recent checks
  7. Public records, like bankruptcies

Address Your Weaker Areas

  • Pay bills on time
  • Don’t use more than 30 percent of your available credit
  • Think twice before closing unused accounts—it can hurt your score
  • Pull your own credit and address issues promptly—you get one free report from each bureau per year
  • Don’t apply for credit unless it’s necessary—extra checks are damaging
  • Get help managing your debt if you’re struggling

Grow Stronger with Interstate Capital

If you’d like to learn more about factoring—a no-debt solution that isn’t impacted by your credit— download our free factoring guide.