Business loans for freight and logistics companies: funding growth when customers pay on 60 days

Freight businesses rarely fail for lack of work. More often they fail while busy, because the national retailer or manufacturer they deliver for pays on 60 days, the fuel, wages, tolls and truck repayments are due this week, and each new contract widens the gap. So the most useful question for a logistics owner isn’t “how much can I borrow?” but “which part of my business should each kind of finance pay for?”

This page works through that question for line-haul and local freight operators, third-party logistics (3PL) providers, warehousing businesses and freight forwarders.

How do lenders size up a logistics business?

Lenders tend to start with the customer list, not the trucks. In freight, revenue arrives from a fairly small number of shippers, often large companies, and the strength of those relationships drives everything else.

Lender’s focus	The concern	What reassures them
Customer concentration	One lost contract can remove a big slice of revenue	Several customers, none dominant
Contract terms	Term, exit notice and rate reviews reveal how dependable revenue is	Written agreements, ideally multi-year
Debtor days	Slow payers tie up cash	An aged receivables report with little over 60 days
Fleet age and finance	Old fleets mean repair bills; heavy finance stretches serviceability	A fleet register showing balances and replacement plans
Fuel cost recovery	Margins disappear if fuel rises and rates don’t follow	Fuel levy clauses that adjust regularly
Compliance	Breaches can cost contracts and attract penalties	Documented fatigue, mass and maintenance systems

Banks are well suited to established freight companies with a few years of accounts, property and long contracts, and they’re often the cheapest source of fleet and working capital finance. If your bank can’t stretch far enough, or the timing doesn’t work, specialist asset financiers and debtor finance providers fill the gap.

Why does debtor finance suit freight so well?

A standard overdraft has a fixed limit. In a growing logistics business that limit gets used up just as a new contract starts, because the business takes on costs weeks before the first invoice is paid.

Debtor finance works the other way around. The lender advances a share of your approved invoices, typically within a day or two of issuing them, and the facility grows as your sales ledger grows. Once your customer settles, the financier recovers its advance and releases what’s left to you. For businesses invoicing large, creditworthy shippers, it’s often easier to get than an equivalent unsecured facility, because the lender relies mainly on your customers’ ability to pay.

Check these before committing:

• Concentration limits. Financiers often cap how much of the facility can relate to one customer.
• Disclosed or confidential. Some facilities notify your customers; invoice discounting is usually confidential but suits larger, well-run ledgers.
• Total cost. Request each fee as a dollar figure on a typical month’s ledger, not just the headline discount. Our invoice finance calculator helps you compare.

Is there a way to see a shipper’s payment habits before you sign?

Yes, and many freight owners don’t realise it. The federal Payment Times Reporting Scheme makes big companies disclose, twice a year, how long they take to settle invoices from smaller suppliers, and anyone can search those reports on a public register. Before you sign a contract with a new national shipper, search the register for its payment record. If it routinely pays small suppliers well beyond its stated terms, build that into your pricing and your working capital plan, or negotiate a fuel and payment clause before the trucks start running.

Lenders appreciate this kind of homework. Showing that you’ve checked how a new customer pays, and planned for it, makes a contract-driven application much more convincing. If a big contract is the reason you’re borrowing, our guide on what to do when you’ve won a big contract and need to fund it is a good next read.

Looking at a contract now and wondering how to fund the start-up costs? Send us the outline and one of our team will review it personally; your credit file isn’t checked at this stage.

Funding the fleet and the warehouse

Prime movers, rigids and trailers. Standard asset finance or a chattel mortgage, usually with the vehicle as security and sometimes a balloon. Fuel used on public roads in vehicles above 4.5 tonnes GVM attracts fuel tax credits at the heavy vehicle rate, indexed twice a year, and lenders see those credits flowing back through your BAS. For the vehicle side in more depth, see truck finance.

Forklifts and handling gear. Straightforward equipment finance, with a deep second-hand market for mainstream brands.

Racking, conveyors and mezzanines. Harder. These cost a lot to install and recover little if removed, so lenders may limit the amount, shorten the term or ask for extra security. A landlord’s waiver may also be needed if the gear is fixed to a leased building.

Warehouse management and tracking systems. Software and integration costs have almost no resale value. They’re usually funded from cash flow, an unsecured loan or as part of a larger facility.

Releasing equity from an owned fleet. If you own trucks outright, a sale and leaseback can turn them into working capital while you keep using them.

What risks do lenders weigh in freight?

• Fuel. If your rates don’t move with diesel prices, a spike can erase the margin on a contract within weeks. Lenders look for fuel levy clauses.
• Chain of responsibility. Under the Heavy Vehicle National Law, duties for safety extend through the supply chain, including schedulers, loaders and the businesses that consign freight. A strong compliance record supports your case with lenders, insurers and customers alike.
• Driver availability. A truck without a licensed driver earns nothing. Businesses that keep drivers tend to look more stable.
• Customer insolvency. If a retailer or builder you carry for collapses, its unpaid invoices may never be recovered. Debtor finance providers sometimes offer or require credit insurance.
• Economic cycle. Freight volumes track consumer spending and construction, so lenders consider how the business would handle a downturn.

What paperwork helps a freight application?

• Customer contracts or rate agreements, especially for your largest accounts
• An aged receivables and aged payables report
• Fleet and equipment register with finance balances and lenders
• Recent business bank statements and the last two years of financials if prepared
• BAS and your ATO portal statement, including any payment plan
• Your safety management or compliance summary
• For a new contract, its volumes, term and payment terms, plus a forecast of cash in and out during the first few months

Illustrative example: a 3PL takes on a new client

A made-up scenario. A Melbourne 3PL with a leased warehouse, four rigid trucks and around 25 staff signs a two-year contract to store and distribute products for a national homewares brand. The brand pays on 60 days. The contract needs another 400 pallet spaces of racking, two forklifts and two more drivers.

The owner checks the brand’s record on the Payment Times register and sees it usually pays close to terms. The business’s bank offers to fund the forklifts but not the racking, and its overdraft is already near its limit. The owner instead puts in place a debtor finance facility across the whole sales ledger, which lifts available cash as soon as the new client’s invoices go out. The forklifts go on equipment finance. The racking is split, with the installer financing part of it and the rest paid from the first two months of debtor finance drawings.

Six months in, the facility has grown with the ledger, and the owner has data to take back to the bank for a broader package.

Let’s look at your freight numbers

Logistics owners tend to know exactly where the cash is stuck: in invoices to big customers, in owned trucks, or in the cost of starting a new contract. We look at freight and warehousing businesses often, including ones a bank has turned down or couldn’t approve in time.

Telling us about your business takes roughly a minute on a short form. Your credit report stays untouched at that point, and what you tell us isn’t circulated to dozens of finance companies. A specialist who understands transport and debtor lending reads your enquiry and calls you directly. Please give us accurate figures on turnover, customers and fleet finance, which helps us recommend a suitable facility on the first attempt.

See what your freight business could access →