Business loans for transport and logistics operators

HomeSec lends to transport, trucking and logistics businesses against equity in real property, from $20,000 to $5,000,000, with no financial statements and no valuation. Funding in as little as 24 hours suits an industry that pays for fuel weekly, pays for repairs immediately, and is paid by its customers in 45 to 60 days.

The cash cycle you are actually borrowing against

Transport runs on the widest cash gap in Australian business. Fuel is bought weekly or drawn on a card settled monthly. Drivers are paid fortnightly under an award with overtime and allowances. Maintenance is paid on completion. The customer — a supermarket chain, a manufacturer, a freight forwarder, a tier-one miner — pays 45 to 60 days after the month the freight moved, and the larger the customer the longer and more immovable the terms.

Sitting across that are the annual lump sums that make transport distinctive: registration on every prime mover and trailer, heavy vehicle insurance renewed as one bill, permits, and the compliance cost of keeping a fleet roadworthy under chain of responsibility obligations. None of them can be deferred, because an unregistered or uninsured truck does not leave the yard.

And then there is the event nobody budgets for. An engine or a transmission on a prime mover is a five-figure repair and often a six-figure replacement, and while the truck sits in a workshop the contract it services still has to be covered, usually by subcontracting at a loss. The cost of the breakdown is rarely the repair; it is the revenue and the customer relationship it puts at risk.

What makes the phone ring

What you can offer as security

The trucks are almost always financed, and chattel mortgages and hire purchase agreements over a fleet leave nothing for another lender to take. Real property is the asset that is generally clear or has equity in it: the operator's home, a depot or yard, an investment property, or rural land.

A depot, hardstand or workshop is commercial security assessed to 70% of value. A home or an investment property is residential and assessed to 80%. Several can be combined, and the borrower does not have to be the owner — a company can borrow with a director's property as security.

We do not lend against the trucks, the trailers, the contract or the debtors ledger. If those are the only assets, we are not the right lender, and you will hear that on the first call.

How much you can borrow

Take the property's value, multiply by 80% for residential security or 70% for commercial, and subtract what is already owing on it. What is left is roughly what is available, between $20,000 and $5,000,000. Several properties can be added together, and the borrower does not have to be the owner — companies, trusts and sole traders — including start-ups, with everyone on title signing. Up to 80% on residential and 70% on commercial. Lower on large acreage, and LVRs may reduce on properties worth less than $800,000.

Why the bank is slow here, and we are not

A bank looking at a transport operator sees a business with heavy existing asset finance, thin reported margins and revenue concentrated in a small number of customers, and each of those pushes a serviceability assessment the wrong way. Fleet finance in particular counts fully against capacity even though the assets are earning.

The process also takes weeks, and a truck off the road is a daily cost. By the time a bank has ordered a valuation and worked through two years of accounts, the contract the loan was meant to protect has usually been reassigned.

We assess the property and the exit, so the fleet's existing finance does not reduce what is available, and a decision comes on the first call.

What the money is used for

• Engine, transmission or major repair. Money on the day, truck back on the road, repaid when the freight is paid.
• Buying a prime mover or trailer outright. Where asset finance will not fund an older unit or is too slow for the opportunity.
• Funding a new contract's first two months. Fuel, wages and subcontractors until the customer's terms come around.
• Clearing an ATO balance. Paid direct from settlement, before it becomes a director penalty notice.
• Registration and insurance renewals. One bill covering a fleet, spread over a loan rather than a single month's cash.
• Buying the depot. First mortgage over commercial premises the operator has been renting.

From the call to the money

What it costs

Priced per file, on the property, the position, the amount and the exit. No rate is published, because a rate with "from" in front of it is the best file's number. How it is priced, and every fee that exists.

Reviewed by Matt Hempel, National Credit Manager