Owner-Operator Financing in Canada

Becoming an owner-operator can be a rewarding move, professionally and financially. However, as a business owner, you have additional responsibilities.

You are responsible for getting equipment and for running operations. These responsibilities can be expensive. Unless you have enough capital, you will need financing to get your new trucking business rolling.

Financing your truck

Getting your first truck is likely your biggest and most important expense. Without a truck, you don’t have a business. There are two ways that you can get a truck: purchase it with a loan or lease it.

Purchasing a truck is straightforward. You make the initial down-payment and then pay monthly until the truck is yours.

Leasing a truck can be a little more complex. A lease is structured almost like a rental, in which you can use the truck in exchange for a monthly payment. At the end of the lease period, you either return the truck or purchase it. Often, the purchase price is defined in advance and is known as the “residual value.”

Some leases are structured so that the residual value at the end of the term is a small amount – making the final purchase easy. This structure provides the option of lease-to-own.

Note that Commercial Capital LLC does not provide financing to purchase trucks.

Is it better to lease or buy?

Each alternative has advantages and disadvantages based in your individual circumstances. This variability makes giving specific advice difficult.

Generally, leases are promoted as having lower monthly payments. However, remember that every benefit comes at a cost. Your best bet is to consult a financial professional or a chartered accountant who, by reviewing your situation and needs, can provide you with specific advice. While using a chartered accountant is expensive, it will likely save you money in the long term.

Running your business

Once you have your truck in place, your second biggest expense is running your business. The primary ongoing expenses for owner-operators are usually fuel and repairs. You need steady cash flow to be able to pay these expenses regularly.

Having enough working capital can be difficult if you work with clients or brokers who do not offer quick-pays. Many shippers pay on net 30-day terms (or net 60). You may need to wait 30 to 60 days until your freight bills are paid, which few operators can afford. This delay is often an issue if you are getting most of your clients through a load board.

If you need quick-pays but your shippers don’t offer them, consider factoring your freight bills. This solution finances slow-paying invoices and provides similar benefits to quick-pays.

With factoring, a finance company advances around 90% of your freight bill as soon as you deliver the load. You get the remaining 10%, less a fee, once your shipper pays the invoice in full. This solution improves your working capital and gives you money to pay for fuel, repairs, and other expenses.

What if you have bad credit?

Getting a trucking business started can be difficult if the owner has limited or bad credit. Financing alternatives are still available, though they may be structured differently or priced accordingly. Keep that point in mind as you review options.

One advantage is that the trucking industry is an asset based industry. For example, a truck is an asset that can be used as collateral for financing. If the buyer or lessor defaults, the truck (the asset) can be repossessed. Likewise, invoices are considered assets that can be financed through factoring. In the case of factoring, the financing is mostly dependent on the credit of the invoice payer – the shipper.

Because trucking is an asset-oriented industry, owner-operators have more financing alternatives than other types of business owners.

Get more information

We provide freight bill factoring to owner-operators at competitive terms. For more information, get a factoring quote or call us toll-free at (877) 300 3258.

Note: Factoring is only available to owner operators that operate under their own authority.