How to Start a Trucking Company
Most people don’t consider trucking when thinking about lucrative industries in the U.S. If you love logistics and driving and you want to start your own business, you should consider a trucking company. It might be the perfect fit for you. More than 70% of U.S freight is moved through trucks. This tells you that the demand for trucks will always be there.
There are many factors that you should have in mind when it comes to starting a trucking company. They include securing financing, choosing a business entity and hiring employees.
So to help you out, here is everything you need to know.
5 Steps for Starting a Trucking Company
If you are still reading, you have probably already decided that a trucking company is a good fit for you. But where do you start?
Step 1: Come Up with a Business Plan
The operating premises of a trucking company may seem straightforward, leading you to believe that you don’t need a business plan. But a business plan ensures that you focus on the important aspects of your company.
Every good business plan details the capital needed to get started, reason for founding the company, financial projections and any other strategy information.
With a business plan, you will be able to create your company based on a blueprint. This will be very helpful once you get down to work. You probably won’t have the time to refocus.
Additionally, you will need a business plan when applying for a small business loan. It makes the process smoother.
Step 2: Register the Business
After writing your business plan, you should register the business with local or state governments.
Choose an Entity
The different business entities have varying taxation methods, personal liability protections, ownership structures, etc.
LLC (limited liability companies) is a good option for a self-owned, one-person trucking company. It offers protection for your personal assets. If you have a partner, check out the various LLCs meant for partnerships and corporations. These two categories are not the only ones but you should start by looking at them.
This process involves a lot of paperwork but it is straightforward. You will need supporting documentation about the founders and principles of the company, general business agreement, tax identification information, among other materials.
Pick a Business Name
The name has to be unique. It should communicate your personality, specialty and brand. Don’t choose a name that has already been taken.
Step 3: Get Business Insurance, Permits and Licenses
You want to make sure that you are operating the company legally. That is why this step is necessary.
Business Permits and Licenses
Trucking companies attract unique liabilities and challenges. So you need to have all the required documents.
In almost all states, you must get a business license to have your headquarters in that particular state. The licenses and policies have to be set up before you get the first shipment on the road.
An International Registration Plan is also necessary as long as your truck is crossing state lines and is over 26,000 pounds. With this license, you can operate in every state and a few Canadian provinces.
Each state has its regulations so it’s best to check with your state and see what you need.
You may have to obtain physical damage insurance, bobtail, cargo insurance and public liability insurance. If you find yourself getting overwhelmed and unsure of what you need, talk to a startup lawyer who knows about trucking companies. They will help you take all the necessary legal steps required.
Step 4: Get the Right Truck
This is a huge decision because it is a significant investment for your trucking company. You have to choose a truck that is right for your business. Here are some important factors you should consider:
- Whether you’ll be operating long distances or locally
- Weight limit
- Used vs new
- How many dealerships they have in the U.S
- Comfort level
- Weather resistance
- Cab style
Go for a test drive before you buy the truck. Some reputable brands include Peterbilt, Freightliner and Kenworth. Their trucks are great for trucking businesses.
Lease Vs Buy
Your decision here will depend mainly on your buying power and each of the two options has its pros and cons.
When you buy, you won’t have to incur monthly charges and you can trade in the truck in the future. But know that it requires a bigger down payment.
With leasing, you have to make regular payments. You cannot trade in the truck. There are also specific regulations that you have to stick to, especially when it comes to mileage and maintenance. One advantage of leasing is that the maintenance costs will be covered.
Step 5: Obtain Startup Finding
A commercial truck is not cheap so you will probably need startup funding. Also consider having a business credit card and bank account.
The Cost of Starting a Trucking Company
A trucking company can be a lucrative business. But you’ll need a significant amount to start. The cost of a commercial truck is about $80,000. And don’t forget that there are also other business expenses:
- Invoicing/accounting software
- Truck maintenance fees
- Businesses licenses and permits
- Documentation and registration
The average amount of loan taken by transport and trucking companies is $106,000, according to Small Business Administration.
So you will probably have to get additional funding. But you have a number of options.
SBA loans usually have generous repayment terms, high loan totals and low interest rates. While these loans are popular, they are not easy to get.
You will need a good credit score, a long credit history and the paperwork is hectic.
Commercial Truck Financing
An equipment financing loan is a great alternative to an SBA loan if you don’t meet the requirements. It also has borrower-friendly terms.
They have commercial truck financing for leasing or buying used or new trucks and upgrading or repairing your truck (if you already own one).
This is how it works: you go to the lender and state how much the equipment (truck) costs. Once the lender approves, they will give you the money and you have to repay it over a set period of time, along with interest.
The truck will be collateral.
Small Business Term Loans
With this option, the interest rate can vary depending on economic factors or stay the same.
Short-term business loans aren’t hard to get—compared to SBA loans—but they have a short repayment period, lower loan tallies and higher interest rates.
Why You Should Start a Trucking Company: 4 Reasons
There’s a Shortage of Drivers
It is estimated that the trucking industry will need 100,000 drivers in the coming years. Companies will be looking for drivers. You will be helping to fill that gap.
Innovation Is Needed in the Industry
Establishing fuel-saving logistics and routes and increasing efficiency to offer value to customers will make you stand out among your competitors. You will be setting yourself up for long-term success.
It Is Recession-Proof
Trucking is a crucial sector of the economy. You will be getting products to warehouses and stores—which is a pivotal role. The trucking industry is also recession-resistant. The market will always be there.
Starting Is Easy
You don’t have to invest a lot to start making a profit and it is easy to expand the business as demand rises. With time, you can even hire drivers and other employees so you don’t have to drive.
The process of starting your own trucking company can seem complicated. But it is just like starting any other small business in reality. The equipment may be more expensive and it can also be competitive. The underlying principles, however, are the same. All you need is financing, licensure and a business plan to get things started.