You’ve got the work lined up.
Maybe you’ve been driving for somebody else and you’re ready to buy your own truck. Perhaps a transport company has offered you subcontract work if you can supply the vehicle, or you’ve identified an opportunity to start taking on work directly.
You find a truck for $180,000.
You have money available for a deposit.
The finance repayment looks manageable.
So you’re ready to go.
Not quite.
For an owner-driver around Tamworth buying their first truck, the amount required to purchase the vehicle is only one part of the money needed to start operating.
The truck may begin earning quickly, but fuel, insurance, registration, maintenance and other expenses can start before the first customer pays you.
The question isn’t only:
Can I finance the truck?
It’s:
Can the business finance the period between buying the truck and getting paid for the work it does?
Start With the Work, Not the Truck
Before buying anything, understand what work the truck will perform.
Are you subcontracting to one transport company?
Do you have several customers?
Will you be doing local work, interstate work, agricultural transport, refrigerated freight, general freight, earthmoving or another type of transport?
What configuration does the work require?
What payload do you need?
Do you need a trailer?
Are there specific age or equipment requirements imposed by the customer?
Buying a truck before understanding the work can leave you with an expensive asset that doesn’t suit the opportunity.
Is the Work Actually Confirmed?
There’s a big difference between:
“We’ve got plenty of work. Buy a truck and give us a call.”
and:
“Here is the subcontract arrangement and this is how the work is allocated and paid.”
Understand what you’re relying on.
Is there guaranteed work?
Is there a minimum volume?
Are you paid by kilometre, load, hour or another basis?
Can the principal reduce the amount of work?
How quickly can the arrangement be terminated?
If one customer will provide most of your income, understand how dependent the business will be on that relationship.
The truck finance continues even if the work doesn’t.
The Truck Price Isn’t the Startup Cost
Suppose the truck costs $180,000.
You might also need:
registration and transfer costs
insurance
fuel
tyres
servicing
communications equipment
signage
toll accounts
safety equipment
load-restraint equipment
permits or accreditations where applicable
accounting or administrative setup
other operating expenses
Then there may be a trailer.
If the work requires a $70,000 trailer, you’re not starting a $180,000 transport business.
The productive asset requirement is already $250,000 before working capital is considered.
Your First Fuel Bill Can Arrive Before Your First Payment
Fuel is one of the clearest examples of the cashflow problem facing a new owner-driver.
You buy the truck on Monday.
You start work Tuesday.
The truck immediately begins consuming fuel.
But when do you get paid?
If the customer pays on trading terms, the business may have to fund several weeks of fuel and other expenses before the first meaningful payment arrives.
The more work you do, the more cash you may initially need.
That’s an unusual feeling for somebody moving from wages into business ownership.
More work can temporarily create more cashflow pressure.
Work Out the Payment Cycle
Don’t estimate this loosely.
Ask the customer exactly how invoicing works.
When can you submit the invoice?
Is it weekly?
Fortnightly?
Monthly?
When is payment made after the invoice?
If you complete work during the first week of the month but can’t invoice until month-end and then wait further for payment, the gap can be significant.
Calculate how many weeks of operating expenses the business may need to fund before cash begins circulating normally.
That’s your mobilisation and working-capital problem.
Don’t Use Every Dollar as the Truck Deposit
Imagine you have $60,000 saved.
Putting all $60,000 towards the truck reduces the amount you need to finance.
That sounds sensible.
But now the new business has no cash.
The first fuel account is due.
Insurance needs to be paid.
A tyre needs replacing.
You haven’t received your first customer payment.
The smaller truck loan doesn’t help if the business can’t fund its first month of operation.
The right deposit isn’t automatically the largest deposit you can afford.
You need to consider how much money should remain available after the truck is purchased.
Build a Working-Capital Budget
Before deciding how much cash to put into the truck, estimate the operating costs for the first few months.
Include the major expenses you expect to encounter.
For example:
Fuel
How many kilometres will you travel and what fuel consumption do you realistically expect?
Wages
If you’re employing another driver or staff member, wages generally need to be paid regardless of whether the customer has paid you.
Insurance
Understand when premiums are due and whether you’re paying monthly or annually.
Maintenance
Even a well-presented used truck can require expenditure.
Tyres
A set of truck tyres isn’t a minor household expense.
Personal drawings
If this is your main income, how will your household expenses be paid while the business is waiting for its first revenue?
That last point is often forgotten.
The Business Has to Pay You Too
Moving from employment to self-employment changes the cashflow equation.
When you were an employee, your wage arrived regularly.
As an owner-driver, the business needs enough cash to pay operating expenses and provide income for you to live on.
Your mortgage or rent doesn’t wait because a transport customer hasn’t paid an invoice.
Include your personal income requirement when deciding how much startup cash the business needs.
A business that can pay for diesel but not support its owner isn’t properly funded.
New Truck or Used?
A new truck may offer warranty coverage and potentially lower maintenance requirements during the early ownership period.
It also generally requires a larger investment.
A used truck can reduce the purchase price, but condition becomes particularly important.
If you’re buying used, look at:
kilometres
engine hours where relevant
service history
previous application
engine condition
transmission and driveline
suspension
brakes
tyres
emissions systems
expected upcoming maintenance
Don’t buy purely on kilometres.
A truck’s previous work and maintenance can be just as important.
Finance Approval Isn’t a Mechanical Inspection
If a lender agrees to finance a used truck, that doesn’t mean somebody has mechanically inspected it on your behalf.
The lender is making a finance decision.
You’re making the asset decision.
If you don’t have the mechanical knowledge to assess the vehicle yourself, consider obtaining an appropriate inspection before completing the purchase.
The truck will be the income-producing asset at the centre of your new business.
Its condition matters enormously.
Buying From a Private Seller?
Private-sale truck finance may potentially be available depending on the lender, business and asset.
But ownership of the vehicle needs to be verified.
The truck needs to be appropriately identified, and relevant checks and documentation may be required.
If existing finance or another registered security interest is identified, that needs to be dealt with appropriately as part of settlement.
Don’t transfer substantial funds to a private seller before understanding how the transaction needs to be completed.
What About Buying at Auction?
Auctions can offer opportunities, but payment deadlines can be short.
If you’re relying on finance, start the conversation before bidding.
Understand the buyer’s premium, applicable GST treatment, payment deadline and any other auction charges.
Inspect the truck where practical or consider obtaining appropriate assistance.
And set your maximum bid based on the complete cost of putting the truck on the road, not simply what appears on the bidding screen.
Do You Need a Trailer as Well?
This can dramatically change the finance requirement.
Perhaps you’ve found a prime mover for $160,000.
The work also requires a suitable trailer costing another $100,000.
Now you’re looking at $260,000 of productive assets.
If both are essential, tell us at the beginning.
Depending on the lender and transaction, there may be options to consider financing multiple eligible assets.
Don’t finance the prime mover first and only afterwards discover that the trailer creates another borrowing requirement the business hasn’t planned for.
What If You Need More Than One Truck?
Some people move into owner-driving with one truck.
Others have an opportunity that requires several vehicles.
Perhaps you’ve been offered enough work for three trucks and intend to employ drivers.
That’s no longer simply an owner-driver transaction.
You’re building a small fleet.
The finance conversation needs to include the additional trucks, drivers, wages, fuel and working capital required to operate them.
Three financed trucks can generate substantially more revenue.
They can also consume substantially more cash before customers pay.
Be Careful With Revenue Forecasts
A transport opportunity can look excellent when you multiply the rate by the maximum number of kilometres or loads.
But trucks don’t operate at theoretical maximum utilisation every day of the year.
There can be maintenance, delays, quiet periods, driver availability issues and other interruptions.
Build your numbers around a realistic operating assumption.
If the business only works financially when the truck is earning at maximum capacity every week, there’s very little margin for normal business variation.
Understand the Difference Between Revenue and Profit
A truck can produce substantial revenue without producing substantial profit.
Suppose the business invoices $30,000 in a month.
That sounds impressive.
Then subtract fuel.
Finance repayments.
Insurance.
Maintenance.
Tyres.
Registration.
Tolls.
Accounting.
Wages if applicable.
And your own income.
The amount left is what matters.
Don’t decide how much truck you can afford from gross revenue alone.
What About a Balloon or Residual?
Depending on the lender and finance structure, a balloon or residual payment may potentially reduce scheduled repayments during the loan term.
But an amount remains outstanding at the end.
Think about how long you expect to keep the truck.
If you’re planning to replace it after several years, consider what the expected finance balance and truck value might look like at that point.
If you’re planning to run the truck for a long time, think about how the final payment will be dealt with.
A smaller repayment today isn’t free.
Part of the debt has simply been moved to later.
What If the Truck Breaks Down in Month Two?
This is why the cash buffer matters.
Even a truck that has been inspected can develop a problem.
If the business begins with no available cash, an unexpected $10,000 repair can become a major crisis.
How would you pay it?
What happens to your income while the truck is off the road?
Could you hire another truck?
Does the business have enough liquidity to absorb the disruption?
You can’t eliminate mechanical risk.
You can avoid starting the business with absolutely no financial room to deal with it.
Should You Use Working-Capital Finance?
Depending on the business and circumstances, separate working-capital finance may potentially be worth considering.
The truck and the operating cash perform different jobs.
Truck finance funds the productive asset.
Working capital helps the business meet eligible operating expenses while revenue begins to flow.
Another option for established invoicing businesses may sometimes involve debtor or invoice finance, depending on the customer base and facility requirements.
The right structure depends on the actual cashflow problem.
Get Your Business Setup Ready
Before starting work, make sure the business side is organised.
Depending on your operation, that may include the appropriate business structure, ABN, bank account, accounting system, insurance and relevant industry requirements.
Speak with your accountant about business structure, GST, tax and record-keeping.
Check the applicable transport and regulatory requirements for the work you’re performing.
Finance is only one part of becoming an owner-driver.
What Should You Send Us?
If you’re preparing to buy your first truck, tell Thrive Broking about the whole startup, not just the vehicle.
Useful information may include:
truck quote or advertisement
trailer details if required
proposed deposit
type of work
expected customer
how you will be paid
expected payment terms
estimated weekly operating costs
amount of working capital available
your previous industry experience
The exact lender requirements depend on the application.
But understanding the complete business gives us a much better starting point.
First Truck Finance Around Tamworth
For a new owner-driver around Tamworth, buying the truck is a major milestone.
But settlement isn’t the finish line.
It’s the point where the business starts spending money.
Fuel needs to go into the tanks.
Insurance needs to be in place.
The truck needs to be maintained.
Your household still needs income.
And customers may not pay immediately.
Plan for that gap before deciding how much cash to put into the purchase.
Ready to Buy Your First Truck?
Send Thrive Broking the truck details, purchase price, proposed deposit and information about the work you expect to perform.
If you also need a trailer or expect a delay before the first customer payment, tell us.
We can investigate truck finance options and consider the asset requirement alongside the broader funding needs of the business.
The first truck needs to do more than qualify for finance. It needs to enter a business with enough cash behind it to keep moving until the customers start paying.