Why Financial Leaders Should Help Truckers Grow Their Small Businesses
At over $940 billion per year, trucking is a fast-growing and economically critical industry. But did you know that it also offers a unique pathway to small-business ownership? Contrary to popular belief, the trucking industry is not controlled by a handful of large conglomerates. Instead, it’s a vibrant ecosystem of small businesses, with 95.8% operating fleets of 10 trucks or fewer and many operating as independent owner-operators.
Despite their significant contribution to the economy, however, trucking entrepreneurs face major financing challenges that hinder their growth and success. As the industry continues to surge, financial institutions across all categories should increase their lending and nonfinancial support for these important and overlooked small-business owners.
The High Costs Of Entrepreneurship In The Trucking Industry
Like any entrepreneur, owner-operators in the trucking industry invest their time, effort and capital to build and manage their businesses. In the case of trucking, that business requires considerable upfront investment: A survey of owner-operators in 2022 revealed that the average cost of a new vehicle was $145,000 ($60,000 for used) and an additional $52,000 for a trailer ($30,000 for used). Entrepreneurs trying to break into the trucking sector need significant capital for these vehicle down payments, which can quickly eat away at any profits.
In fact, despite grossing an average income of $258,000, trucking entrepreneurs can face annual expenses upwards of $187,000—netting to an average salary of $71,000 per year in an industry that requires notoriously long hours. On top of that, small trucking businesses are contending with the ongoing effects of supply chain disruptions, high interest rates and the high price of diesel fuel, which exacerbate their financial strain.
The Financing Struggle
As with many small-business owners, access to tailored, responsible financing is difficult for trucking entrepreneurs. Traditional banks rely heavily on credit history, collateral and stable income. But trucking is an industry with irregular cash flow. Truckers may put their vehicles up as collateral—but they should recognize that if payments are late for any reason, lenders can then repossess the truck, which represents the critical earning asset the owner has to continue operating and earning cash.
Additionally, while trucking enterprises are increasingly owned by women and people of color, those same groups already suffer from significantly limited access to loans through the traditional financial system. All of these challenges make for an uphill battle—one that we must address as financial industry leaders.
Alternative lenders, such as community development financial institutions—which specialize in underfunded entrepreneurs—are another option for small trucking businesses when seeking capital. CDFIs can work with the unconventional financial circumstances of trucking entrepreneurs and may be able to offer specialized financial products to assist with down payments and/or flexible repayment structures that align with the irregular cash flow of the trucking industry. They also tend to consider factors beyond traditional credit evaluations, such as the business owner’s industry knowledge, experience and potential to succeed.
Next Steps For Financial Leaders
Financial leaders, especially in the CDFI and alternative lender space, should make efforts to tailor their products and services to the unique attributes of trucking entrepreneurs. Additionally, they should market and build awareness in the trucking industry so that owner-operators are informed about the lending and support options available to them.
Like any small-business owners, trucking entrepreneurs must become adept with business and financial management, tax preparation, hiring and more. Financial leaders can coach small trucking owner-operators through these challenges, helping them grow and thrive. These resources are particularly valuable to women and entrepreneurs of color trying to set themselves up for success in a sector that’s largely white and male, where mentors and support networks may be scarce.
Additionally, financing providers need to prioritize building strong relationships with their clients. They should take the time to understand the unique needs of entrepreneurs in the trucking industry, providing guidance and support beyond financing—including business coaching, networks and mentorship.
To build a more inclusive and equitable financial system, it is essential to recognize the significant economic contributions of trucking entrepreneurs. These businesses are essential, moving more than 70% of all goods transported throughout the U.S. and driving economic growth, job creation and community development. As financial leaders, it’s our responsibility to make sure that those who have the drive to enter the trucking industry get the fuel they need to launch their journey.
