To run a chauffeured transportation company, you need money to start and run your business. Below are are some options that can help you with your financial decision. Make sure to discuss your different options with a certified financial planner or a CPA before making any huge financial decision like this.

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Traditional Sources of Capital

1. PERSONAL SAVINGS

Consistent cash flow is essential for maintaining company success. This is one of the primary shortcomings of businesses starting out, hence why it's strongly encouraged for entrepreneurs to save up money before starting a chauffeur transportation company. To  start, it is said that you should have approximately 2 months expected revenue worth of cash - 3 if possible.

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2. BANK OR CREDIT UNION LOAN

When companies require loans, banks and credit union loans are the way to go. Banks have established reputations and can offer low interest rates for people with good credit scores. Credit Unions, on the other hand, offer similar services as banks, but are typically non profit companies serving curated groups or communities. Since they are less established than banks, they often provide better rates on loans.

3. SBA LOANS

The SBA (Small Business Administration) helps businesses starting out acquire the proper resources to venture down a successful path. They don't offer loans themselves, but they connect businesses with private companies, thus resulting in lower overall rates.

Some additional factors include:
  • Takes approx. 30-90 days to process
  • Might require 2-3 years in business or more
  • Might require good personal and business credit scores

Check out this list of SBA lending partners:  https://www.sba.gov/partners/lenders/microloan-program/list-lenders

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Additional Lending Sources

There are plenty of small nuances that may delay the process for small businesses to acquire loans from the typical sources. One typically requires collateral, at least 2-3 years in business, and a solid business and personal credit score. However, there are plenty more options, that though riskier, can prove worthwhile for companies starting out.

4. BORROWING  MONEY AGAINST 401K
  • Having a 401(k) sets businesses up well - they then have an asset to borrow against and something sufficient to fall back on. With this, you don't need a good credit score, can get good rates on loans , and can save time on  applying to loans for financial situations.
  • Additionally, one can leave their current employer and acquire a solo 401(k) for self employed individuals. This way, one can borrow money without a penalty, if his/her 401(k) has an option to borrow. IRS regulations allow people to borrow either 50% or $10,000 of the total balance -they cap the borrowing amount at $50,000.
  • 401(k) loans don't show up as debt on credit reports, so acquiring the loan doesn't damage one's credit score. You can then utilize this loan to pay down high-interest loans and free up credit utilization to improve eligibility for better rates and typical loans.
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5. BUSINESS CREDIT CARD

Owning a business card can prove to become very expensive due to their interest rate of 24% APR. If you get lucky, you may be able to acquire a card with a low intro rate or interest after signing up within in the first 6 to 18 months. One of the few downsides includes not being able to borrow as much money, but the card can cover other small expenses. What helps is when you choose a credit card that has a 1% or 2% cash back program, so that of each purchase you make, you get some money back.

Type of Loans

6. BUSINESS LINES OF CREDIT
  • A business line of credit is like a revolving credit account. Each month, you pay a certain amount and then upon running out, can request more. This allows for more flexibility when financing your company. Downsides include high interest rates, annual fees, and draw fees.
7. SHORT-TERM LOANS

There are several advantages to short term loans:

  • fast money
  • no collateral
  • don't require good credit rating

Finance charges are typically higher than those of traditional bank loans. Also, you are charged a factor rate in place of interest, with which you pay a fixed fee instead of a rotating fee. All interested investors need to see prior to lending money is proof of consistent cash flow within the company.

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8. INVOICE FACTORING

Owner operators tend to use this form of funding the most. With this, when you send the invoice, client has 30+ days to pay. This can potentially hinder cash flow - working with a freight factoring company can help free up some money.

Before borrowing money from any source, make sure you know your credit score and ways to improve a lower credit score. It's no simple feat to fund a small business, especially in the transportation industry; with the right resources and knowledge, you can embark on a successful  path and save money along the way.