Finance for haulage and logistics companies

Our current funding partner doesn't take haulage and logistics companies right now. That's on us, not you. So this page won't pass you on, but it will set out how finance works for a haulier, which products fit a fleet, and what they cost, so you can judge offers on your own.

The cash-flow shape of a haulage business

Haulage spends first and gets paid later. Fuel, drivers' wages, tolls, tyres and maintenance go out every week. Customers are usually other businesses on credit terms. For business-to-business deals an agreed payment date must usually be within 60 days, and where no date is agreed, payment is late 30 days after the invoice or delivery, whichever is later. Either way, you carry a month or two of costs for every job on the books.

Fuel is the swing factor. When diesel prices move, your costs move the same week, while rates agreed with customers move later, if at all.

Operator licence financial standing

A goods vehicle operator licence comes with a financial standing requirement: you must show money is available to keep vehicles fit and serviceable. On a standard licence the gov.uk guidance sets £8,000 for the first vehicle and £4,500 for each additional one. On a restricted licence it is £3,100 for the first vehicle and £1,700 for each additional one. It is not a fee. It has to be available for as long as you hold the licence, and the guidance says it can be shown with a bank balance and/or an overdraft facility.

That has two finance consequences. Adding trucks raises the figure you must keep available, so growth needs cash on top of the vehicle itself. And finance that drains the account with heavy daily debits can push your balance below the line you have to show.

Which finance fits, and which doesn't

• Asset finance is the natural fit for tractor units, trailers and vans. The vehicle secures the deal, and hire purchase or leasing spreads the cost over its working life.
• Invoice finance fits hauliers with business customers on 30 to 60 day terms. It advances most of each invoice soon after you raise it, which pays for this week's fuel with last week's work.
• Business loans fit a planned step, such as a depot or workshop.
• Fuel cards with credit terms can smooth fuel spend, though that is supplier credit rather than finance.
• Merchant cash advances rarely fit. Haulage customers don't pay by card, so an advance would be collected by fixed debits, which is short, costly money against a slow-paying ledger.

What it costs: a worked example

Say the company borrows £100,000 at 18% APR over 24 months, repaid monthly.

• Monthly repayment: £4,992.41.
• Total repaid: £119,817.84.
• Interest: £19,817.84.

Sterling's rule of thumb calls under 20% APR "priced like bank lending". Now test it against your worst month: fuel up, one big customer paying at 60 days, and the licence balance still covered. If £4,992.41 still clears, the loan fits. Use the repayment calculator on this page for other rates and terms.

If customers pay late, the law is on your side. On business-to-business debts you can claim statutory interest at 8% plus the Bank of England base rate, unless your contract sets a different rate.

What funders typically ask a haulier for

• Filed accounts and recent management accounts.
• Bank statements showing receipts and fuel spend.
• An aged debtor list and the main customer contracts.
• Your operator licence details and fleet list.
• Existing finance agreements on vehicles, since most fleets carry some.

Red flags specific to haulage

1. Repayments that eat your financial standing. Any finance that leaves your balance below the licence figure creates a compliance problem as well as a cash one.
2. One customer, most of the ledger. If a single shipper is most of your invoices, their payment run sets your cash flow, and an invoice finance provider may cap how much they will fund against them.
3. Balloon payments you haven't planned for. Some vehicle finance ends with a large final payment. Know the figure and the date before you sign.

Limited companies only

Plenty of owner-drivers run as sole traders. Ask Sterling only works with limited companies, because introducing sole traders and small partnerships is regulated credit broking. Business finance for limited companies is not regulated by the Financial Conduct Authority.