Financing For Towing Companies
Tow trucking businesses operate in an industry where consumer satisfaction is constantly changing – tow trucking employees are often despised when removing an illegally parked vehicle, but praised and cherished when they come to the rescue for roadside assistance. The tow truck industry has continuously seen changes throughout the years. There are endless amounts of forms of towing, with maritime towing being the most historical. Originally, maritime towing involved barges hauling along rivers or canals using tow ropes drawn by men or animals walking along the banks, but has now turned into a refined towing science! The other forms of towing also include hauling away fallen trees, tractor and trailer combinations, and cargo or leisure vehicles coupled with ball or pintle or gudgeon trailer-hitches to cars and trucks.
What most people associate with the tow truck industry though is the towing of cars and trucks. Towing is essentially coupling two or more objects together so that they can be pulled by a designated power source or sources. These sources include a motorized vehicle (or the typical tow truck people associate with tow trucking) or another vessel such as an animal or human; the load can be almost anything such as a car, truck, or even a tree. The load can be joined to the tow truck through a variety of different options, but the most common ways a car is connected to a tow truck are: chains, ropes, bars, hitches, three-points, fifth wheel, coupling, drawbars, integrated platforms, and anything else that can keep the objects together while moving.
The tow truck industry is highly competitive and diverse, especially since there are a multitude of small, medium, and large sized companies all competing for limited contracts. However, the tow truck industry is facing continuous growth allowing there to be more contracts for all tow trucking companies. The tow truck industry is predicted to exceed $5.9 billion by the end of 2016 due to the growing demand for tow trucking services. The tow truck industry has seen continuous growth in the past few years, with expectations of continuing growth for the next five years. As the economy continues to rebound, the amount of disposable income is rising because more people are going back to work. With more people going back to work and having more extra income, more cars are being purchased, leading to an overwhelming amount of cars on the road today. With more cars on the road comes more mechanical failures or issues leading to the increased use of tow trucks. In conjunction with more cars on the road due to more disposable income, the excess money that people have today is leading to more homes, buildings, and apartment complexes being built. Since there will be more opportunities through construction, many tow truck businesses now have the option to generate more contracts with these new businesses, leading to an even higher increase in the dependency for tow trucks in the United States today.
There are many positive outlooks for the tow trucking industry today, but that does not mean there is not a lot of work to be done by tow truck business owners to stay on top in this highly competitive market. Efficient communications equipment, newer vehicles and equipment, computer-assisted technologies for booking and route-planning facilities, and better insurance coverage costs are all emerging trends for the tow truck industry that many business owners are struggling to implement due to the increased costs for all of these necessities. To make a tow trucking business profitable, tow truck business owners must start implementing these trends into their businesses, but being aware of the variety of tow truck loan and finance possibilities can help make this transition easier and more affordable.
Reasons a Tow Truck Company Would Need Financing?
- The tow truck industry is an incredibly technical industry to be in, especially with the growing government standards and required certifications. The tow trucking industry is highly regulated to prevent costly mistakes that can endanger people and workers, so obtaining the necessary certifications to meet government and industry standards is important, but to make sure every single employee stays up to date with training can be costly – but this is a cost that can only benefit a tow truck business. Reviewing the different finance options for a tow truck industry to meet these standards is always the best choice.
- Employees and payroll costs in the tow truck industry are important. Since the tow trucking industry is highly dependent on reoccurring business, which is dependent on quality customer service, then allocating funds to well trained, qualified, and experienced staff members is a major concern for many tow truck business owners. When there are slow or difficult times for a tow truck business owner, reviewing different finance options to cover payroll costs is always a possibility.
- Expansion is always an interest for many successful tow truck business owners, but being able to save enough money to make the expansion while covering the typical day to day costs associated with a tow trucking business can seem almost impossible! Remembering that there are many different loan alternatives to help finance the expansion process for a tow truck business will help.
- Equipment, rent, and car storage place are vital in the tow truck industry. If a tow truck business does not have quality equipment, or a large enough lot to store the vehicles that they tow, then a tow truck business will not succeed. Making sure to have available funds to cover these costs can be essential for a tow trucking business.
- Technology is dominating every other industry in the United Sates today, so it would only make sense that technology based systems would be necessary in the tow truck industry as well. Many tow truck companies that have started to implement costly CRM systems are already reaping the rewards. Using computer-assisted booking and route-planning facilities can also increase efficiency and lead to less labor costs, so utilizing the variety of technological systems to help a tow truck business grow can be incredibly beneficial.
- Insurance is an unavoidable expense in almost every industry, but with the tow truck industry in particular the amount of insurance needed is pretty high. The types of insurance most tow trucking companies are required to have include: general insurance, health insurance, risk insurance, payment protection insurance, liability insurance, worker’s compensation, overhead expense disability insurance, and business owner’s policy group insurance. While all of these insurances are not necessarily required to be purchased, having all of these polices for a tow truck business makes the business more reputable, as well as having coverage in case something goes wrong that can put an owner out of business. If a tow truck business is unable to make these costly payments, there is always financing options available.
Types of Tow Truck Loans
| Types | Rates | Terms | Funding |
|---|---|---|---|
| Bank | 6-10% | 3-7 years | 14-30 days |
| SBA | 6-10% | 3-7 years | 10-30 days |
| Line of Credit | 5-15% | 1 – 3 years | 7-30 days |
| Alternative | 6-25% | 1-5 years | 5-7 days |
| Cash Advance | 1.16-1.55 | 3-24 months | 1-3 days |
Traditional Tow Truck Loans
Traditional bank loans and lines of credit typically offer the best rates and terms for tow truck businesses, however there are strict requirements such as good credit and a well-established business documentation.
- Rates: 4-10%
- Terms: 1-5 years
SBA Tow Truck Loans
SBA loan choices for small tow truck companies also offer decent terms and rates that can be used for working capital, equipment, and supplies and materials. However, your tow truck company must have decent credit.
- Rates: 6-8%
- Terms: 7-25 years
Alternative Tow Truck Loans
Mid-prime business loans are a great funding option for tow truck companies that are unable to obtain traditional financing since they require a much lower credit score than banks, as well as less documentation to qualify.
- Rates: 8-25%
- Terms: 1-5 years
Asset Based Tow Truck Loans
Most tow truck businesses own or lease real estate, so using that real estate as collateral for tow truck financing can be an option.
- Rates: 10-20%
- Terms: 1-5 years
Tow Truck Equipment Leasing
Having current, up to date tow truck equipment is essential for all tow truck companies, but if you cannot afford to cover the up front costs associated with buying new equipment, looking into tow truck equipment leasing is a great choice.
- Rates: 6-20%
- Terms: 1-10 years
Tow Truck Cash Advances
During unexpected emergencies, or if your business bad credit, considering merchant cash advances for your tow truck business can be an option. Tow truck cash advances are great for businesses that have bad credit or need capital instantly.
- Factor Rates: 1.16 – 1.50
- Terms: 3-24 months
