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3 Smart Tips for Financing Fleet Expansion

By Sean M. Lyden - Staff Writer
Posted Jun 12th 2018 12:41PM


Tony Freeland became an expedite owner-operator in 2003 and about a year later he purchased his second truck to become a fleet owner. Today, Freeland is the owner and general manager at JAS Expedited Trucking LLC, based in Imlay City, Mich., with a total of just over 30 trucks.

So, what advice does Freeland have for other fleet owners on how to finance growth without putting their future at risk?

#1. Be cautious about lease-purchase agreements.

Freeland obtained his second truck—the one that made him a fleet owner—through a lease-purchase that turned out to be a positive experience for him. But a few years later, he got burned by another lease-purchase that caused him to rethink his strategy.

“I had the truck for about three years, making payments directly to the owner. But I had nothing set up with the bank that he had the truck financed through,” says Freeland.

You can probably see where this story is headed.

Freeland continues, “The truck was sitting in the yard one day, as our drivers were getting it ready to go out when a repo company showed up. It turns out the owner hadn't made payments for a while; he'd take my payments and put them in his pocket."

What was the lesson learned?

"Now, anytime I do a lease-purchase with an owner, we have it set up through the bank where I make the payments directly to the bank. The bank realizes what we're doing; he signs the title, and I'm on the title," says Freeland.

#2. Determine the maximum percentage of your fleet you will finance.

Freeland’s policy: “I don't finance more than half my fleet.”

Why? "You'll inevitably hit slowdowns. This policy helps ensure that I get through those slowdowns," says Freeland.

"It does mean running some older trucks," says Freeland. "But it will help you get through the slowdowns. Right now, the economy is good. But, when the economy slows down, and you're struggling to get your teams enough miles a week, you don't need to be financing too many trucks.

#3. Strengthen and protect your credit score.

To convince lenders to help finance your fleet expansion, do everything you can to build up and preserve your creditworthiness, advises Freeland.

“Never be late on your bills. I mean any bills—don't even be late on your electric bill. And don't overspend your revolving credit,” says Freeland.

By “revolving credit,” Freeland is referring to credit card balances. “If you have a $25,000 credit card, and the card is maxed out all the time, you're going to have a lower credit score. But if you have a $25,000 credit card with only $5,000 on it at any given time, that will bring your credit score up. And you've got to have a decent credit score if you’re going to succeed in this business,” says Freeland.

The Bottom Line

As a fleet owner, you’re objective is to add trucks to your fleet in the most profitable way possible. So, use these three tips to navigate your funding options so that you can expand your fleet without overextending your finances.




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