Business Finance for Haulage Companies

Haulage is a cash-intensive business. Vehicles are expensive to buy and maintain, fuel and wages are paid as the work is done, and customers often pay on credit terms. A haulier can have a full order book and still feel squeezed, because money goes out well before it comes back in.

This guide looks at the main cash-flow pressures in road haulage and the types of commercial finance commonly used to manage each one.

Where the cash goes in a haulage business

• Vehicles and trailers. Tractor units, rigids, trailers and vans are a large upfront cost, and fleets need replacing as vehicles age.
• Fuel. Fuel is a major running cost, paid continuously, and prices can move in ways that are hard to budget for.
• Drivers. Wages are paid on a regular cycle whether or not customers have paid for the work. Covering peaks with agency drivers adds further cost.
• Maintenance and compliance. Servicing, tyres, repairs, inspections and roadworthiness testing are ongoing. An unplanned repair can also take a vehicle off the road and stop it earning.
• Customer payment terms. Many haulage customers pay on agreed credit terms, and some pay late. The gap between delivering a load and receiving payment is often where the pressure builds.

These pressures compound as the business grows. Winning a new contract can mean adding vehicles, hiring drivers and buying more fuel before the first invoice is paid.

Matching finance to each need

Different needs suit different types of funding. Paying for a vehicle out of day-to-day cash, for example, can leave the business short when fuel and wages fall due.

Vehicles and trailers. Asset finance is commonly used to acquire new or used vehicles and trailers, with the cost spread over the agreement. Hire purchase, finance leases and contract hire work differently, particularly on ownership and what happens at the end. Our guide on how to finance new vans and trucks covers the practical choices.

Releasing cash from the existing fleet. If the business owns vehicles outright, asset refinance may release cash against them while you keep using them.

Customer payment gaps. Invoice finance can release cash tied up in eligible unpaid invoices rather than waiting for customers to pay. For hauliers invoicing other businesses on credit terms, this can help fund fuel and wages as turnover grows. Availability depends on your customers, your invoicing and the provider.

Fuel, repairs and running costs. Working capital finance or a business loan can help cover operating costs, seasonal peaks or the cost of mobilising a new contract.

Operator's licence and financial standing

Goods vehicle operators must show financial standing to hold an operator's licence. In general terms, this means demonstrating that the business has enough financial resources to run and maintain its vehicles properly.

If you are planning to add vehicles, check how that affects the financial standing you need to show before you commit. The licensing authority publishes guidance on the requirements and the evidence it accepts. Confirm the current position with the authority or your adviser rather than assuming a particular facility will count towards it.

What providers will ask a haulier

Finance providers typically look at trading history, recent accounts, bank statements and existing finance agreements. For haulage businesses, they may also ask about:

• the size, age and ownership of the fleet
• your main customers and how concentrated your revenue is
• contract terms and how long key contracts run
• how changes in fuel costs are reflected in customer pricing
• your operator's licence and compliance record

Be open about any issues, such as a lost contract or a vehicle off the road for repair. Providers make their decisions on the full picture. A commercial finance intermediary such as Emirex Finance can help you organise this information and explore options suited to transport and haulage businesses.

Key points

• Haulage cash flow is squeezed by upfront vehicle costs, fuel, wages, maintenance and customer payment terms.
• Asset finance suits vehicles, invoice finance suits customer payment gaps and working capital finance suits running costs.
• Check how fleet growth affects the financial standing you need for your operator's licence before committing.
• Providers will look at your fleet, customers, contracts and compliance as well as your accounts.

This guide is general information, not financial, legal or tax advice. Finance is subject to status, eligibility and approval by the relevant finance provider. Emirex Finance works with UK limited companies only and is not authorised or regulated by the FCA.