Small Business Loans for a Moving Company
Americans like to move around – whether it is within the same city or between states, according to the U.S. Census Bureau, over 32.5 million people packed up and moved in 2017. Whether they relocate for a new job, due to a divorce, or to find a better place to live, the U.S. population’s mobility represents opportunities for moving companies.
Moving companies fall into three buckets; local movers, interstate and long-distance movers, and companies that provide both services. If you are just starting a moving company start small, perhaps with just in-town and intra-city moves, while you learn the ropes. While you can subcontract larger, interstate moves, if anything goes wrong, the customer will be yelling at you. Scaling up takes time and experience and access to capital.
Shield Funding understands the taking your moving company to the next level requires additional working capital. We make the process fast and easy, and you can approved in just a few clicks. Even if you have bad credit we can get you business funding so apply online now. Below is a list of the requirements to get approved for business funding with our most basic program. There may be additional factors that are considered, meeting these three requirements though gives you a very high chance of having your application approved.
What Do I Need to Qualify?
Below is a list of the requirements to get approved for business funding with our most basic program. There may be additional factors that are considered, meeting these three requirements though gives you a very high chance of having your application approved.
Types of Business Loans Available
While you can take out auto and truck loans for your large vehicles, you will need capital for other aspects of running and growing your business. The type of loan that will best suit your needs will depend upon what you intend to use its proceeds for, but these are some suggestions of loans for moving companies.
1. Working Capital Loan
Working capital is the amount of money that you have to “work” with on a daily basis. These are the funds you can use to cover day to day operations such as rent, utilities, and payroll. To calculate your working capital, subtract your current liabilities from your current assets.
Terms for working capital loans can last from one to three years, so you can use them to cover cash flow issues while just getting started. When making lending decisions, lenders consider factors such as your credit score, time in business, and monthly revenues. If the loan will be outstanding for a longer period, the lender has more risk that it will not be repaid. Therefore the minimum credit score required for a working capital loan is 650. Your business must generate $10,000 a month in revenues, but you are only required to have been in business for two months.
Interest rates vary, but with an alternative lender, you can expect to pay between 9% to 45%. The interest rate you are charged reflects your risk, so raising either your credit score or revenues or both, will lead to a lower rate.
2. Bad Credit Business Loan
While banks offer small business loans, they are notoriously difficult when working with small businesses. They do not lend unless a business has been operating for over two years, has strong and steady cash flows and growth, and the small business owner has an excellent credit score. This meant that the marketplace was not serving many borrowers, so alternative lenders stepped in to fill the gap.
Alternative lenders offer bad credit business loans, where “bad credit” simply means that you cannot qualify for a bank loan. This could be for a number of reasons, though Shield Funding will lend to borrowers with credit scores as low as 500. These loans have higher interest rates due to their higher risk, between 12% to 45%. They also have shorter terms of 2 to 18 months.
If you only needed a small amount of capital, say to cover rent for a few months or pay for repairs on a truck, you can borrow as little as $5,000. They have flexible repayment terms and will work with borrowers to align with their business’ cash flow, which is great for the ups and downs of a moving company.
3. Short Term Business Loan
Short term business loans help businesses who have a temporary need for capital. While other types of loans may be cheaper and more suited to long-term plans, a short term loan can help out in a pinch.
Short term loans have terms of six to 24 months, making them ideal for covering a cash crunch but not the choice for a long-term expansion plan. Taking out a loan costs you more than just payments and interest, you will also pay application fees, loan processing fees, and more. Therefore, running out of capital and having to take out another loan to complete a larger project is not ideal.
Need to build out warehouse space or add lockers, and you only anticipate the project taking three months? Consider a short term business loan. Rates are between 9% to 45%, and you must have a minimum credit score of 650 to qualify. With Shield Funding, you can borrow between $15,000 to $1 million.
4. Unsecured Business Loans
Lenders simultaneously want to make money when they grant a loan, which can be done by taking on some risk, and yet minimize their risk. One way that they do this is by requiring that you pledge collateral for your loan. Collateral can be assets such as a truck, business savings account, or investment and retirement accounts.
If you have been running your business with rented trucks and vehicles, you may not have any assets to pledge. Pledging personal investment or retirement accounts might feel too risky. If you do not have collateral or do not want to risk collateral you will want to apply for an unsecured business loan.
Unsecured business loans will cost you more, as the lender has far more risk. Interest rates will be between 9% to 45%, and you must have been in business for one year to qualify. Monthly revenues should meet or exceed $10,000, though borrowers can have a credit score as low as 500.
Financial Growth Tips for Moving Companies
Just like moving locations, where you start is not where you want to end up. Whether you have just booked your first move, or have been in business for years, planning for growth ensures that you have a viable business. As well, thinking about how you want to grow will help you define your business and target demographic.
When you are developing your business strategy, think about incorporating some of these tips.
State of the Industry
The industry generates $12.6 billion in annual revenues. Moving companies do not just make money from local or long-distance transportation, however. Those services make up 69.6% of their income, with warehousing and storage contributing 20.2% of income and packing and packaging, making up the remaining 7.5%.
While Americans move around, they do not always hire professional movers. An analysis of the three million interstate moves in 2016 found that only 550,000 of those moving used a professional moving company. If they are moving between states, individuals are more likely to rent a truck and do it themselves. This is something new business owners should consider when launching their business.
Local movers have plenty of work, as 62% of those who moved in 2017 stayed in the same county. It is an industry favorable to small businesses; 47.8% of companies have fewer than five people on their payroll, so new entrants do not have to worry about tough competition from a large player.
The top ten states that people move into are Illinois, Nevada, Vermont, Arizona, Oregon, North Carolina, Tennessee, Montana, South Carolina, and Alabama. The top ten states that people move out of are Illinois, New Jersey, West Virginia, New York, Alaska, North Dakota, Connecticut, Kansas, Michigan, and California. If you are thinking of opening or expanding an interstate moving company in any of these states, you will be sure to find work.
Why people move matters if you are building a company that specializes in serving customers in one demographic. Corporate moves, or relocations for jobs, make up 37% of people who move after individual family moves at 44%. People moving because of military assignments or federal jobs are 18%. These statistics matter when deciding on marketing efforts, especially if you operate in a city with a strong military presence.
Lastly, while the overall industry has been stable, it has not shown extreme growth. If you are an entrepreneur seeking to invest in a high-growth industry, you may want to look at other options. However, you should always consider your local market and local population trends.
Costs to Operating a Moving Company
What will it cost you to open or expand a moving company? If you start small, you could use a truck or van that you already own. There is nothing to stop you from renting one, either, or hiring temporary help and taking on small, local jobs. Renting a truck, however, will quickly eat into your profits.
On average, renting a truck or van can cost between $50 to $2,000 depending on the number of hours and miles driven. Since the average price per hour for intrastate moves is $80-$100, paying almost half for just the truck significantly reduces your profit. Do not forget that you must also pay labor and rent or buy pads, blankets, and moving dollies. At some point, in order to grow your business, you will want to consider buying your own trucks and vans.
Once you own vehicles, factor repair and maintenance costs into your business plan. When will you need to replace tires? And what will you pay for auto insurance? In the beginning, you can run a moving business out of your house with just a cell phone, but to grow, you will need to hire office staff and rent space. Someone will have to maintain a moving calendar, coordinate available trucks and movers, and accept payment.
Moving companies also need to purchase liability and cargo insurance to protect the items in their vans. The requirements vary, but when you reach the size that you need a business license, too. When you apply for and receive a license, the state will require you to purchase insurance, though the amount and type of coverage varies by state.
When putting together your business plan, do not forget that the industry is strongly cyclical. Half of all moves happen during the summer, which means that you will have to budget and plan for lower-income months during the other seasons. Some costs, such as payroll for full-time staff and rent, will remain the same year-round. Cash flow management, or occasionally borrowing working capital, will become crucial to staying in business.
Sell Products and Ancillary Services
If you have ever rented a U-Haul or other truck, you have seen shelves stocked with items in the rental office. Even if people do not use your moving services, selling boxes, and packing tape to walk-in’s can boost your bottom line. Turning some of your office space into a retail area can help your company grow.
Adding services related to moving can also boost your profit margin. Nobody loves packing and disassembling furniture, and many homeowners are happy to pay extra for this service. If you are hired for a corporate move, the company may have already relocated the individual and wants a mover who provides this service. You can also market and provide this service on sites such as Taskrabbit separate from your moving service.
Another ancillary service would be garbage removal and disposal. The person moving may not want to take their old couch with them but cannot fit it into their small car to take to the dump. Charging to pick up and remove large, unwanted items keeps your trucks busy during the off-season or ups the revenue you make from a move.
Do not forget about the other end of the moving process, either. Once in their new abode, the person may not want to put all that furniture back together or unpack boxes. If you have the workforce, you can offer unpacking or furniture assembly services.
Add Storage Space
Existing moving companies make 20.2% of their income from warehousing and storage space. Sometimes people must move out and have yet to buy another home, or do not know where they are going. Other times, there is a gap between residences. Offering warehousing or storage space can increase your income.
Storage units typically charge monthly rents based on size, but if you are moving company, you can also charge to pick up and unload someone’s items into the storage space. Then you charge again to reload and move once they have found a new home. Renting or buying a building that allows you to store goods for a short period can pay off handsomely.
Reach out to local corporations, talk to the managers of large apartment buildings, and make connections that can boost your business.
Corporations frequently sign contracts to partner with one company for all their relocation needs. Whether it is a one-time move or a year-long contract, relocations can happen at any time of the year. Nabbing a corporate contract could help you generate revenue in the off-season.
The property managers of large apartment complexes know when tenants are planning on moving out, sometimes months in advance. Forming relationships with them, perhaps by offering them a finder’s fee or discounts to people in their buildings, can help you build a steady stream of work.
Market your Moving Company
Marketing efforts get the word out about your company. A well-designed marketing plan targets and reaches your potential customers. If they cannot find you and find out that you exist, they will not hire you.
Invest in a clear, professional website. Most people start their search for a business online now, and without a website, you will be at a disadvantage. Consider investing in technology that supports online quotes, be upfront about your rates and services, and at a minimum, have a form to collect someone’s contact information.
Many moving companies buy leads from websites such as moving.com or Angie’s List. These websites collect emails and information from potential customers when they search for local movers, which you can then purchase. The advantage of buying leads is that you know the person has already expressed an interest in your service and needs a mover.
Once you receive your leads, follow up immediately. Practice your phone pitch so you can quickly describe and sell your services. Before you call, make sure that your calendar and scheduling software is up-to-date so that you can answer questions about upcoming availability. The better prepared you are, the easier it will be to capture the business.
The Final Word on Borrowing and Moving Companies
There are few barriers to entry when starting a moving company. If you can find people to help load, unload, and drive trucks, and rent or buy a truck, you are in business. To build a sustainable, long term enterprise, however, you will have to plan for growth. Growth eventually requires capital.
Loan products help small business owners succeed. Taking out the right loan for the right reason will push your moving company to the next level. If you are ready to grow, reach out to Shield Funding today.