Lending Library

Small businesses nationwide are struggling with the fallout from the coronavirus crisis. New research suggests that 50% of business owners have felt the effects, and nearly 40% report a decline in revenue. These negative trends were mainly chalked up to fewer customers visiting business locations, customers being more reluctant to make purchases, and customers having access to less disposable income.

Given the dire situation, the federal government is taking unprecedented action. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) will allocate $2 trillion for relief initiatives. Included in the package will be a one-time payment to many Americans. Individuals making up to $75,000 a year will receive a $1,200 payment. Married couples making no more than $150,000 will get $2,400, as well as a $500 payment for each child in their family.

SBA disaster loans get a boost.

In addition to the personal payments from the relief package, there are multiple benefits for small businesses in the CARES Act. These include:

• Paycheck Protection Program (PPP): Get up to $10 million to cover payroll support expenses such as employee salaries, paid sick leave, paid medical leave, insurance premiums, mortgage payments, rent payments, and utility payments.
• Economic Injury and Disaster Loan (EIDL) and Loan Advance: These loans are specifically relevant in situations where your business didn’t suffer any physical damage but was harmed nonetheless. You can receive up to $2 million to cover expenses you would’ve been able to pay if the disaster hadn’t occurred. Because of the severity of the coronavirus pandemic, you can actually apply for an advance of up to $10,000.
• SBA Debt Relief: With this program, the SBA pays the principal and interest on new SBA 7(a) loans that are funded before September 25, 2020. If you have an existing SBA 7(a) loan, the SBA would pay the principal and interest for 6 months. Note that this benefit is limited to SBA 7(a) loans and wouldn’t be applicable for PPP loans or EIDLs.
• SBA Express Bridge Loan: With values up to $25,000, these loans require less paperwork and hit your bank account much faster than a typical SBA loan. This program is intended to deliver faster relief to those who need it.

Businesses can qualify for the expanded Small Business Administration (SBA) disaster loan program as long as they don’t employ more than 500 people. As with other SBA loans, this financing is not actually funded by the agency. Rather, the COVID-19 loans are facilitated by the SBA, and the money comes from banks and various independent lenders. The key element is that the SBA guarantees a portion of the loan, which lowers lenders’ risk and makes them more willing to work with those who have less-than-stellar credit history.

SBA small business loans are intended to help small business owners overcome the negative effects of the coronavirus pandemic, so if you’ve struggled to make payroll, cover accounts payable, handle fixed debts, or pay your bills, you could qualify.

Finally, the Families First Coronavirus Response Act could also help you during this challenging time. This federal action bolsters unemployment benefits and creates rules for emergency paid sick leave impacted by the pandemic.

The regular lineup of SBA disaster loans.

Multiple other SBA emergency loans for small businesses are available. While the details vary, they are all intended to help a business after physical or economic damage is caused by a declared disaster.

An SBA disaster loan can be used to repair or replace real estate, personal property, machinery and equipment, and inventory and business assets. But don’t go thinking that you could use one to expand your operations. The rules clearly state that it’s only intended to restore things to the way they were before the disaster.

Here’s a quick look at 3 different types of SBA disaster loans not directly related to federal action in response to the coronavirus crisis:

• Home and personal property loans

For those living in a declared disaster area and who have been victims of a disaster, there may be relief available through these loans. It’s worth noting that even though these loans are provided through the SBA, you don’t need to actually own a business to qualify.

• Business physical disaster loans

If your business or organization is within a declared disaster area and sustained damage during that disaster, you can apply for one of these loans. Common examples include a hurricane or flood. These loans provide up to $2 million and are intended to help you replace or restore any damaged property.

• Military Reservist Economic Injury Disaster Loans

This loan is specifically earmarked for business owners who employ a military reservist called to active duty. In these situations, the SBA funding can help your business with operating expenses.

Current declared disasters.

In order to qualify for SBA assistance for more regionalized physical disasters, you will need to live in a designated disaster area.

You can search for Presidential and SBA declared disaster areas by state and territory with the SBA’s online database. Recent examples include flooding in Tennessee and Mississippi, wildfires in Hawaii, and Hurricane Idalia.

Once a Presidential disaster is declared in your area, you need to first register with the Federal Emergency Management Agency (FEMA). To get started, call FEMA at 1-800-621-3362 or visit DisasterAssistance.gov.

After you’ve gotten a registration number from FEMA, you’re ready to complete your SBA online application. You’ll need to have the following information handy:

• Contact information for all applicants
• Social security numbers for all applicants
• FEMA registration number
• Deed or lease information
• Insurance information
• Financial information such as income, account balances, and monthly expenses
• Employer Identification Number for business applicants

The SBA will review your application and then send an inspector to do an onsite review and to estimate the cost of your damage. The SBA makes these disaster loans a priority, so you can expect to hear back on their decision within a few weeks.

One thing to note is that the most commonly cited reason for delays in the process is an incomplete application. With this in mind, spend a little extra energy making sure every detail is correct before you click submit.

Also, don’t wait for any insurance settlements before you file your loan application. This common delay can cause borrowers to miss the filing deadline. If a settlement is made after you’ve applied, you can simply add the final insurance information at that time.

While every effort is made to ensure the accuracy of information when a story is published, the coronavirus pandemic and Paycheck Protection Program (PPP) have caused details to change at a rapid pace. Additional guidance from the government may change or clarify certain aspects of the forgiveness process and could result in changes to the information contained in these pages. For the most up-to-date information, please visit the COVID-19 section of our website. For more information, you can call us at (855) 853-6346. Lendio is not responsible for and provides no warranty as to the accuracy of this content. Lendio does not provide legal, accounting or tax advice. The information and services Lendio provides should not be deemed a substitute for the advice of such professionals who can better address your specific concern and situation.

When applying for business loans, credit cards, or other lines of credit, lenders put your credit scores in the spotlight. Credit scores tell lenders at a glance how responsible you are when it comes to borrowing money and paying bills. But just how important is that 3-digit number? Here's what you need to know about the highs—and lows—of credit scoring. 

Credit Score Ranges Explained

There are different FICO score variations, but the typical score range you're working with is 300 to 850. VantageScores, which are an alternative credit scoring model, work along the same lines. The current VantageScore version also ranges from 300 to 850. 

What Is Good vs. Bad Credit?

• Payment history: 35% of score
• Credit usage: 30% of score
• Credit age: 15% of score
• Credit mix: 10% of score
• Inquiries for credit: 10% of score

That range leaves a lot of gray area in-between where you have different levels of credit. For example, here's how FICO breaks down its credit score ranges and grades:

• 800+: Exceptional credit
• 740 to 799: Very good credit
• 670 to 739: Good credit
• 580 to 669: Fair credit
• <580: Poor credit

Why Credit Scores Matter When Seeking Financing

A FICO score in the excellent range virtually guarantees that you'll be approved, whether you have a perfect 850 credit score or not. In fact, lenders typically don't distinguish much between a score of 800 or 850. Either one sends a strong signal that you're a low-risk borrower, based on your past payment history and credit usage. 

Having a credit score in the poor or fair credit range, on the other hand, could make it much more difficult to get approved for loans. You may be limited to certain borrowing options, such as a secured loan or line of credit. Generally, the lower your score, the riskier you appear in the eyes of banks and lenders. 

Your credit score also counts when it comes to how much you pay for a loan. As a rule of thumb, the higher your credit score, the lower the interest rates you can qualify for. Getting a low rate is important, whether you're taking out a loan for your business or any other purpose because it means less money you have to pay back over time. 

Is Aiming for a Perfect Score Worth It?

With that in mind, it's helpful to work on improving your score as much as possible, particularly if you plan to borrow money to fund your business. If your credit score isn't as high as you'd like it to be yet, here are some of the smartest things you can do to get it on the right track:

• Pay your bills on time. Payment history accounts for the largest share of your personal credit score, so get in the habit of paying on time. Setting up automatic payments for your personal and business expenses can make this easier.
• Reduce your debt. Carrying high balances on your credit cards can work against your score. Prioritize paying down some of what you owe, aiming to use 30% or less of your total credit limit.
• Limit new inquiries for credit. Applying for new credit cards or loans can knock a few points off your score each time. Stick with applying for new credit only when it's absolutely necessary.

Running a business can make anyone’s stress levels rise. In a Bank of America survey of 1,001 small-business owners, 41% of respondents said managing the business is by far the biggest cause of stress—more so than raising children (9%). 

Money is often the leading cause of stress, and bad habits typically cause money problems for business owners. If you’re feeling stressed and overwhelmed with the financials of your business, consider these 7 habits that could be sabotaging your success. 

1. Cutting costs without considering their impact.

You will find that many business owners make decisions that are “penny rich but cash poor,” meaning they save in the short run but lose money in the long run. In a Planet Money episode, one restaurant owner wanted to add an extra table to his crowded New York restaurant, thinking a new table would bring in more money. The reality was that he needed to take away a table because customers would then feel more comfortable and spend more—raising profits as a whole.

We often think that the best way to increase revenue is to add. Whether that’s adding a new line of products, additional services, or some other investment into the business, we believe that we can fix a money problem by adding more expenses and resources. However, many times we need to practice addition by subtraction.

Learning what to spend and what to cut takes time and an innate understanding of your customers and industry. Make sure your changes will help your employees and customers in the long run, not just your bank statement in the short run.

2. Keeping messy books—or no books at all.

A lot of people avoid going to the doctor for fear of what they might hear. This “don’t ask, don’t tell” mentality is also how many owners feel about their books when business is not going well. As businesses start to lose money, they tend to turn a blind eye to their finances. 

They don’t want the stress of seeing their debts and focus instead on other aspects of the company. However, this practice is like throwing water on an oil fire because your books are one of the best resources for business owners to make better strategic decisions.

Clean and accurate bookkeeping can help you find waste in overscheduled employees, forgotten client invoices, or other ways to cut expenses and increase revenue. If you are in trouble, stay focused and keep your books in order. 

3. Ignoring changes in the market.

You spent weeks and months honing your business model and developing a successful plan before launching. You might have even enjoyed many years of growth and profitability.

However, consumer demand and other market trends can lead to changes in your business, and if you’re not willing to adapt, you’ll struggle. 

Perpetually broke business owners often focus on their company and strategies without investing enough time into external research and analysis. Even worse, these same owners will continue the course regardless of market or consumer changes. 

Would you rather be wrong and profitable or stubborn and broke? 

Successful business owners understand the importance of adaptability. They’re willing to make strategic changes based on feedback, financial trends, and other market factors that indicate a need for it.

4. Starting too many projects at once.

The other side of the pendulum from managers not keeping an eye on the market is the business owner who has a habit of chasing the “next big thing.”

These business owners will start projects before finishing others. They’ll spend time, money, and resources pursuing multiple avenues and projects without truly being able to invest the care and focus needed to do any well. 

While chasing the next trend, they neglect the core competencies of their businesses and miss out on increasing profitability through more efficiency.

Consider how many new ideas and projects you and your team can handle. You will have more success with one carefully-researched and executed project than several half-baked ideas. 

5. Micromanaging team members.

When times get tough, some business owners dig into the daily operations and start to micromanage staff. They believe that the best way to increase profitability is to keep a closer watch over their employees and the minutiae of their businesses. However, this is far from the truth.

Most businesses cannot operate with one person dictating everything. Micromanaging will often drive away your good employees, thus increasing turnover costs. It’s also unrealistic because you’ll create bottlenecks in your operations.

Rather than micromanaging, focus on big picture decisions that have a more significant impact on the success of your business and implement processes that empower and incentivize your employees.  

6. Forgetting to train and grow employees.

A good manager doesn’t just avoid micromanaging—he or she actively works to train employees and make them more responsible and independent. Roughly 85% of employees say that job training is important to them. They believe it improves their job performance and gives them more self-confidence to make decisions. 

Not only will training your employees make them more effective, but it will also keep them around. Employee turnover is a serious issue for many businesses. Employee turnover leads to more stress for your current staff, and it has a direct and profound effect on your bottom line. SHRM suggests that it can cost 6–9 months’ salary on average to replace a salaried employee.

If you’re neglecting training and employee growth opportunities, you should change that habit and begin investing in your staff.

7. Not taking time off.

We get it—running a business is an around-the-clock job. How can you take a break or vacation if you want to turn your business around? Well, you need to take breaks, not just for your sanity, but because it’ll actually make you more productive.

In fact, business owners should take more time off than most employees because of the increased stress that comes with running a business. Experts recommend taking at least a week each quarter (4 weeks of vacation per year) to relax, reboot, and regain your strength to push on when you get back.

Find a balance.

The vast majority of the bad habits on this list have to do with a lack of balance or moderation. Closely managing employees is a good thing until it becomes micromanagement. Adjusting to change is a smart business practice until you take on too many projects at once. By balancing your goals and ambition with realistic expectations and healthy choices, you can avoid becoming a perpetually broke business owner. 

Nearly 50% of all American veterans decided to ditch the corporate career route after World War II and forge their own entrepreneurial paths. With their training, discipline, and willingness to sacrifice, these military members made fantastic small business owners. But since the Korean War, the percentage of military veterans starting businesses has dwindled.

Why? Because starting a business wasn't easy, and the US economy made it nearly impossible for veterans to get access to the financing and resources they needed. That's far from the case today.

The government noticed the issue and did something about it (if only they'd do the same thing about the DMV). By introducing veteran-specific educational programs, financing opportunities, and set-aside contracts, the US government has finally given military members an even playing field.

One business-changing advantage the government has given veterans is the Vets First Verification Program. Qualifying for this program could change the way you do business forever. If you're a veteran small business owner, don't do business another day without learning the ins and outs of this program—it's a game-changer for anyone who is targeting government contracts.

What is the Vets First Verification Program?

The Vets First Verification Program is a government program that allows your business to bid on federal set-aside contracts and get exclusive access to resources and support. To do any business with the US Department of Veteran Affairs (VA), you'll need to register your business with the Office of Small & Disadvantaged Business Utilization (OSDBU), which isn't as easy as it should be. More on that later.

Government contracting can open up millions of dollars of new opportunities for your business—that's why securing a contract is so tricky. Fortunately for you, The Veterans Entrepreneurship and Small Business Development Act of 1999 guarantees up to 3% of quality federal government contracts and subcontracts will be set aside for veteran-owned small businesses (VOSB) and service-disability veteran-owned small businesses (SDVOSB). That 3% might not seem like a lot, but since the government spent $550 billion on contracts in 2018, rest assured—there's a whole lot of business to be had.

Advantages of being a veteran-owned small business.

While qualifying and registering your VOSB can be a pain in the you-know-what, it's definitely worth it. Here is a taste of the benefits and advantages you can expect:

• Ability to work with the VA: The VA only works with VOSBs and SDVOSBs, so you'll be part of a smaller pool for any work they have to offer.
• Set-aside government contracts: Be first in line to win federal contracts reserved just for military veterans. These contracts could make up the entirety of your entire business.
• Educational resources: The VA offers training on everything from building a successful business plan to strategies to win government work.
• Mentorship and networking: You'll be connected to individuals who have the know-how to guide you in the right direction. The VA will also help you build relationships and connections with large private-sector firms and those in charge of government procurement.
• Special financing terms: The SBA offers small business loans to the general population, but they provide lower rates, better terms, and financial support to VOSBs.

How to register your business as a VOSB.

Before you try and register your business as a VOSB, make sure you meet all the VA's qualifications:

• Be considered a veteran, meaning (a) you've served on active duty in the military and have not been dishonorably discharged or (b) served as a Reservist and were called to federal active duty or were injured in the line of duty.
• Own at least 51% of the company you register and be in charge of the day-to-day operations and management.
• Have the necessary experience to make business decisions.
• Must be the highest-paid person at the company.
• Work full-time for the business you're registering.
• Hold the highest position at the business.

If all of these conditions are true, then you qualify to register your business as a VOSB.

Next, you'll need to apply online through the Vets First Verification Program. The application will walk you through all of the necessary steps.

If you have questions about your eligibility or how you can ensure your application will be accepted, the Center for Verification and Evaluation (CVE) hosts free webinars to answer all of your questions. You can also find a local Verification Assistance Counselor to give you one-on-one support by using the VA's state-organized list.

Get registered—it's worth the hassle.

Even if you don't want access to set-aside government contracts or educational resources, it's still a good idea to register your business as veteran-owned. Studies show that 70% of Americans prefer to do business with a VOSB than a non-veteran-owned one. This is a free, fantastic opportunity you can't pass up!

The process can be a hassle, but it's worth it in the end. Don't wait to get the help you need—these exclusive resources are invaluable, especially for new business owners. Thank you for your service—we wish you the best of luck in this next important stage of your career. 

As a small business owner or someone who is self-employed, tracking your business-related expenses and understanding what you can and can't deduct while doing your taxes is critical. Not only can it maximize your small business deductions and save you lots of money, but it can also help you reduce your risk of being audited.

Some of the most common business-related expenses are travel costs. Whether you drive to meetings often or fly out for conferences and stay in hotels, understanding what is and isn't considered a travel expense is an important aspect of small business accounting.

What Is a Travel Expense?

However, not all business-related travel expenses are deductible. According to the IRS, you can't deduct anything extravagant or unnecessary, so don't try ordering a private limo service to pick you up from the airport and writing it off. You also have to be traveling away from the general area considered your "tax home" for at least 1 workday to deduct your costs as travel expenses.

Different Types of Travel Expenses

Transportation

Additionally, if you use your car to get around on a business trip, you can claim mileage on your taxes and deduct it at the standard mileage rate. According to the IRS, the mileage rate for 2020 is 57.5 cents per mile that you drive for business-related usage.

Airfare

Accommodations and Lodging

Food

Miscellaneous Travel Expenses

• Shipping and handling costs for luggage or work-related materials to and from your destination
• Laundry
• Business-related communication (business calls or faxing, for example)
• Tips paid for work-related expenses
• Other necessary costs related to business travel

What Isn't Considered a Travel Expense?

You can't deduct any travel expenses that aren't business-related, which includes personal expenses completed while traveling for business. You also can't deduct travel expenses that are superfluous or excessive, such as luxury purchases. If your family travels with you on a work trip, their expenses don't count as your travel expenses.

When you have business-related expenses in your home city, they may or may be deductible. However, they aren't considered travel expenses.

Knowing what counts as a travel expense will help you understand what you can and can't deduct when doing your taxes. Pair that knowledge with common small business tax credits, and common small business tax mistakes, and you'll be able to maximize your refund and avoid being audited.

Every successful business is built on a successful plan. And one of the most important aspects of your plan will be the marketing strategy. After all, if people don’t know about your business, they will never be able to pay for your goods or services.

As you strategize your marketing efforts, you’ll need to pay close attention to your budget. There are diverse ways to approach your marketing budget. One popular method is to let the expenses lead the charge. As you list out key marketing executions, you’ll keep a running tally of the cost. Then you take the total cost and adjust your budget to accommodate your chosen marketing efforts. This aggressive approach makes marketing a priority, sometimes at the expense of other aspects of your business.

An alternative way to approach your budget is by earmarking a percentage of your revenue for marketing. This approach is a more reactive way of handling your efforts, as your strategy will need to be reigned in any time revenue decreases. But this method helps contain costs and ensures that the other areas of your budget won’t be infringed upon by marketing expenses.

Regardless of your chosen budgeting approach, it’s important to understand the various expenses you should include in your budget.

“Marketing expenses are an important consideration for all businesses because marketing is a primary business function that creates a customer for the business,” explains a business finance report from the Houston Chronicle. “It's critical for business owners to understand the significance of marketing expenses, its accounting definition, marketing expense management, and tax treatment.”

This guide will introduce you to many of the common marketing expenses that small businesses deal with. It’s not intended to be a comprehensive list. Each business has unique elements and needs.

Marketing Expense Examples:

• Online presence: You can’t operate a successful business these days without a website. Plan on expenses related to buying a domain, designing your website, and paying for hosting. You’ll also want to have a blog and multiple social media accounts. These channels are relatively inexpensive to create and operate, but there will be expenses related to the creation of content.
• Digital tools and technology: The costs associated with digital tools typically have a great ROI because of the precious time the tools can save you. But you’ll still need to account for expenses such as email platforms, project management software, accounting software, or customer relationship management systems.
• Research: The best marketing is always guided by data. Plan on expenses related to surveys, industry reports, focus groups, product testing, or magazine subscriptions. You can minimize these expenses by leaning to the digital side, where tools like SurveyMonkey allow you to conduct high-impact research without the hefty price tag.
• Advertising: The best advertising campaigns involve multiple media channels. Examples of possible expenses include display banners, TV spots, radio ads, direct mail, and print ads.
• Printed materials: This category can be a catchall for various printed pieces, such as business cards, catalogs, brochures, coupons, vouchers, or posters. Depending on your industry and location, these expenses vary significantly.
• Samples or gifts: One of the best ways to help someone understand the benefits of a product or service is to let them experience it firsthand. Consider allocating money for samples and gifts to lure customers to your business or reward their loyalty.
• Sponsorships: This approach allows you to connect your business with others in a way that attracts new customers. Affiliation is a powerful tool, so it could be worth the cost.
• Equipment: Accomplishing your marketing goals may require additional equipment. For example, if you’re taking product photos, you might want to invest in a quality camera. Or you might need tablets to use for presentations at trade shows or networking events.
• Promotional items: If this is a marketing strategy you plan to use, there will be expenses related to bags, shirts, pens, electronics, sunglasses, stress balls, or whatever else you plan to give away.
• Events: This category includes expenses such as flights, ground transportation, hotels, meals, registration fees, booth displays, and other necessary supplies. Depending on your industry, this category could potentially be a major component of your marketing budget.
• Public relations: You might want to enlist the help of communications experts in your marketing. A talented public relations expert comes at a premium cost, but if you use their skills to the fullest advantage, it can be worth it.

You know you want to start a business, but you have no idea how to get started.

Going from initial idea to full-fledged business is a lengthy process. At first, you want to do enough brainstorming and research to make sure you've landed on the right business idea. After you've locked in the idea, you need to start developing a plan for everything from your financials to your marketing and sales to your management and operations. You'll also have some legal hoops to jump through, including registering your business and securing licenses and permits.

That's the easy part! Once you're ready to go, you'll need to secure funding to cover your startup costs and build up the capital and inventory you need to open the doors and, eventually, start turning a profit.

The startling truth is that about 50% of all new businesses fail. The reasons for their failure vary, whether it’s offering a product with no market need, lacking capital, not having the right team, or not being able to compete. All of these reasons come down to one thing, though— a failure to adequately prepare before jumping in headfirst.

All of this isn't to scare you away but rather to emphasize that getting answers to your questions now will help you keep things running smoothly in the long-run. With proper planning, new business owners can make sure that there's a need for their idea, the funding to get it off the ground, the right talent to propel it forward, and the resources to compete with other companies.

Whether you already have a business plan or don't even know what kind of business you want to start, here are answers to the most commonly asked questions about starting a business.

The idea

1. What kind of business should I start?

Before asking yourself what kind of business to start, you should ask yourself what you're passionate about. As a business owner, you're going to have to dedicate an immense amount of energy and time to get your business off the ground, so it should be something you care about. 

After that, identify which of your interests can be transformed into a product or service that's needed. You want to operate at the intersection of passion and demand. To get your gears turning, here are some common industries for small business:

• Food and beverage
• Accommodation
• Health care and fitness
• Arts, entertainment, and recreation
• Web design and marketing
• Auto repair
• Pet care
• Business consulting
• Personal care
• Cleaning and repair services
• Real estate

2. Should I start my own business or buy a franchise?

According to Entrepreneur, franchises have a higher rate of success thanks to brand recognition and proven demand. If you want a higher degree of security, buying a franchise might be right for you. 

However, with a franchise, you have to pay the owner fees and royalties that eat into your profits, and you don't get much freedom or flexibility when it comes to the direction and growth of your business. If you value flexibility and innovation, you might prefer to start your own business.

3. Will people buy what I'm selling?

The most important step to take before going all-in on your new business idea is to make sure there's a market for the product or service you want to offer. You can do market research on your own, but it's a good idea to at least meet with a consultant. Research your industry, your target market, your competition, and your geographic area if your business is tied to a physical location. Use this information to develop an informed idea regarding the viability of your business idea.

4. Why do so many businesses fail?

Another method for gauging the viability of your business idea is to look at why other businesses fail. Machine intelligence platform CB Insights analyzed startup data to come up with the top reasons new businesses fail, and the conclusion was clear—almost half of startups failed because there was no market need for their product or service.

The other 2 biggest reasons for startup failure included running out of cash and not assembling the right team, followed by less common reasons like being outcompeted, pricing and cost issues, having a user un-friendly product, or lacking a business model.

5. Can I run my business from home?

Many people nowadays start their businesses with the goal of being able to work from home. While the internet makes this scenario a lot easier to achieve, lacking a physical presence can make it challenging to grow your business and get the word out there. 

If you want to run your business from home, you must be comfortable using technology and working from behind a computer. You should also learn the basics of skills like digital marketing and web design. Unless you're an expert, you'll want to outsource those tasks, as they'll be critical to your business's success.

The setup

6. Who can I talk to about starting a business?

Once you've got an idea or two that you think will make for a good business, it's wise to seek counsel regarding issues like profitability, setup, and funding. Consider speaking with a business consultant or business coach as well as small business owners in your community.

The US Small Business Administration works with local partners to provide you with mentorship as you start and grow your business, so use them to search for local assistance in your area. There is also a plethora of resources for female business owners and programs for boosting minority business owners.

7. Do I need a business plan?

While you should get clear on your business idea before taking the time to create a business plan, you will need one eventually. Business plans help you develop your business idea further, as well as identify any potential issues and tweak your plan before putting it into motion. They're also a necessary tool for communicating with other people, such as investors, lenders, partners, or employees, why they should jump on board.

8. How do I create a business plan?

Find a detailed guide to creating a business plan that you can follow. Most business plans include the following 7 parts.

1. Executive Summary
2. Business Overview
3. Market Analysis
4. Competitor Analysis
5. Sales and Marketing Plan
6. Operations and Management Plan
7. Financial Plan

Essentially, you will need to define your business and its goals, do a market analysis, investigate your competitors, detail your business financials and come up with financial projections, and explain exactly how you plan to achieve your business goals.

9. How do I pick a good name for my business?

The key to choosing an effective business name is to pick a name that's both simple and unique. Names that are long and complicated can be easily forgotten and difficult to spell, making it hard for your business to gain traction by word-of-mouth and via the internet. 

On the other hand, you want a name that's memorable, catchy, and conveys your business's unique brand identity. Above all, you want to avoid using a name that's already taken. Search the internet for your business name, do a trademark search at USPTO.gov, and look up the .com domain name, as you'll want to buy that. You'll also want to register your business name once you've selected one.

10.  How do I choose a business structure?

You'll need to decide how to structure your business, and the most common options are sole proprietorship, partnership, LLC, C corporation, and S corporation. The structure that's right for you will depend on your business's size and ownership, and the structure you choose will determine how you're taxed. Read up on the different business structures and decide which one is the best fit.

11. How do I register my small business?

Unless you're operating as a sole proprietor and your business name is the same as your legal name, you'll likely want to register your small business. 

The process for registering your business will depend on the business structure you chose, but generally speaking, you'll need to register with state agencies. Most states require you to update your registration every so often. You may also want to apply for licenses and permits depending on your business type and location.

12. Do I need a business bank account?

You should open a business bank account as early as possible if you're starting a business. For both legal reasons and accounting purposes, you'll want to keep your business finances separate from your personal finances. This separation protects your personal finances from your business's liability, and it also makes doing your taxes and analyzing your business revenue easier.

The best way to keep your business finances separate is to open a business bank account and use it for all of your business transactions. This approach also makes you look more professional and helps you build a business banking relationship.

13. Do I need a business credit card?

You don't need a business credit card, but they can be useful. Not only does a business credit card help you build business credit, but the best business credit cards offer lucrative rewards for all the money you're spending on your business.

Business credit cards can also be useful for covering short-term cash shortages. If you need a little extra cash to make an important purchase, your business credit card is faster than a loan. It's also likely more expensive, though, as credit card interest rates are high. For this reason, it's important to pay off your balance in full each billing cycle if you can.

14. How do I keep track of my business finances?

Apart from keeping your business finances separate, you'll also want a good accounting app that can help you track and organize your business finances, send out invoices, and help you do your taxes. Look for an app that allows you to connect your business bank account, offers customized invoices, and provides a tax estimator. Most accounting apps come with a free or low-cost basic plan and allow you to upgrade to more robust plans as needed.

15. How do I set business goals?

The key to setting business goals is knowing which metrics to value and pay attention to. You'll want to create a list of KPIs, or key performance indicators, and set goals in relation to those. These metrics should be crucial to your business's success and easy to measure and quantify. 

Common KPIs include profit margins, revenue growth, revenue concentration, and working capital. These can also be more specific to your business, such as the number of new contracts per quarter or average event attendance numbers. Make sure to set deadlines for your KPIs, which can include monthly, quarterly, and annual goals.

By choosing a few KPIs, you'll be able to set business goals that are relevant, specific, and easy to measure. You'll also be able to share these goals with your team and have them track their individual progress accordingly.

The Funding

16. How much money do I need to start a business?

The Small Business Administration offers a tool to help you calculate your startup costs, which will include everything from rent, inventory, and equipment to permits, employee salaries, advertising, and website costs.

Your exact startup cost will depend on the size and type of business you want to start. For example, the typical cost of starting up a microbusiness is $3,000, and most people who start home-based businesses need around $2,000 to $5,000. However, if you want to open a restaurant, retail store, or something similar, you'll likely need significantly more money to get started.

17. How can I get funding for my business?

While some entrepreneurs prefer to self-fund, you don't always have to have the cash in hand to start your business. There are plenty of ways to secure funding that will cover your startup costs or the ongoing costs of running your business until it's profitable. Common methods for funding small businesses include the following.

• SBA loan
• Startup loan
• Business line of credit
• Business credit card
• Business grants
• Bootstrapping
• Friends and family
• Crowdfunding
• Angel investors
• Venture capital

Each funding method has its own pros and cons. For example, bootstrapping can leave you with less capital but more freedom, whereas bringing in investors provides access to a big capital boost but means losing some equity.

18. How can I get a small business loan?

Small business loans can be a good funding option for business owners who don't want to give up control of their business but want immediate access to more capital. You'll want to figure out which small business loans you qualify for and what the application requirements are for each one. 

You'll need good credit, and some lenders will check both your personal credit and your business credit score. Many lenders will also want to see that you've already been in business for at least a year and are generating at least $50,000 or $100,000 in revenue, although there are exceptions. You'll need to provide business and personal tax returns, bank statements, and other legal documents to apply. Most importantly, you need to make sure you can repay your loan on time before borrowing any money.

19. How can I get investors to invest in my business?

If you've decided you want to raise money for your business, the first step is finding investors. There are online fundraising platforms, like AngelList and StartEngine, that make it easy for business owners to connect with potential investors. You'll also want to get out in the real world to get noticed. Startup events and conferences are great places to do this, as are startup accelerators.

Finally, don't underestimate the power of your community. Ask around, and maybe someone will be interested in investing in a local business. You can also start a crowdfunding campaign on websites like Kickstarter, Indiegogo, and Patreon.

20. How long until my business is profitable?

It can take anywhere from 6 months to 2 or 3 years for your business to start regularly turning a profit. Most business owners should plan for at least 1 year without a profit, although franchise owners will likely generate profit more quickly.

It’s important to consider this starting stage when creating your business plan and deciding how much money you need to start your business and whether you want to resort to funding options such as loans and investors.

So, you’ve decided to truck it out by yourself and start your very own trucking company? Well, congratulations! The trucking industry is ripe with growth and opportunity, and it’s just waiting for ambitious entrepreneurs like you to seize the occasion.

See, America needs trucks. We desperately need trucks. The shortage of truck drivers is getting worse every year, and that deficit is expected to widen by more than 100% over the next decade. Aging drivers are retiring, women are struggling to join the industry, and the labor market is growing tighter and tighter—so more knowledgeable trucking business owners is exactly what our country needs.

The trucking industry is—and will remain for the foreseeable future—the lifeblood of the US economy, moving nearly 71% of all freight tonnage in the country. Annual truck tonnage has seen growth over the last 10 consecutive years, and although 2019 wasn’t as magical as 2018 for the industry, now’s as good a time as ever to jump into the competition.

But starting your own trucking company isn’t all wide-open roads and beautiful sunsets—it’s a lot of hard work, patience, and savvy decision-making. Oh, and money. Yes, money. One of the biggest barriers to entry in this industry is capital. Fortunately for you, there are plenty of fantastic financing options that can help you get your business off the ground. But how much cash are you going to need, exactly? Good question.

This guide is chock-full of all the costs you can expect to pay when starting your trucking company. It includes the obvious investments (like your truck and its many big ol’ expensive tires), and it also contains the not-so-obvious expenses (like toll fees and CDL endorsements). It’s all here to give you a good idea of what it’ll cost to make your trucking dream a reality. But before we dive into the nuts and bolts of your expected costs, we need to take a step back and look at the big picture—your business plan.

Begin with your business plan.

Before you start planning how many trucks you’re going to buy and how much it’ll cost you, you need to take a holistic approach. By creating a business plan, you’ll be able to see the path from start to success in its entirety, and you’ll see all the essential milestones along the way.

There’s no one-size-fits-all business plan in the trucking industry. You may decide to hire a bunch of owner-operators with their own trucks, or you could choose to build a fleet of big rigs and find talented truckers to drive them. And your aspirations now could change over the next 2–3 years, and that’s okay. Your business plan isn’t a binding document to keep you headed in one direction—it’s a GPS to get you from where you are now to where you want to go.

So step 1: get out your business plan. If you don’t have one yet, that’s A-OK—check out our step-by-step guide to creating your plan. Once that’s done, you’re ready to start making some real estimates. As we look through all the expected costs of starting a trucking business, you’ll likely discover new opportunities and barriers that’ll change your business plan. That’s great! Keep it close by so you make sure it’s always up-to-date.

Now, on to the costs you can anticipate.

Expect these costs for starting a trucking business.

Starting a trucking business isn’t cheap. You’re going to need trucks, truckers, parking, equipment, office space, licenses, permits, gas, marketing material, and much more—it’s not as simple as buying a truck and hitting the highway.

In fact, depending on what kind of business you want to build, you might not actually drive the truck at all. Perhaps you’ll hire full-time truckers. Maybe you’ll hire subcontractors. Or you may just run a one-person show where you do it all—there’s no right answer, but you’ll need to factor in the associated costs of each decision you make.

It can all be a little overwhelming, and that’s why we’re going to help you take it step-by-step, item-by-item. Let’s start with some of your most expensive assets first: real estate and trucks.

1. Real estate

As you scale, your real estate demands will grow, but on day one, you’re going to need some basics. You’re going to need docking and parking for your fleet, and you’ll likely want office space for administrative tasks—nothing fancy, but you’ll need something. Preferably, you’ll want to find locations that are easy-access for massive trucks and are close to major highways and interstates. This location will help eliminate unnecessary transportation waste and save valuable time.

2. Trucks

Next, you’re going to need trucks. Start small and scale as you grow. You may just want to start with 1 or 2 trucks, at first, and buy more as need demands.

A new truck and trailer could cost you well over $150,000, so you’ll have to decide whether you want to buy new, buy used, or even rent or lease. Purchasing a brand new truck will guarantee it’s in tip-top shape, meaning you’ll have fewer maintenance and repair bills over the next few years. But you pay a hefty premium for that peace of mind.

Buying a used semi-truck is much like buying a used car—just on a much larger scale. You’ll save thousands of dollars up front, but you should anticipate more maintenance costs and fewer years left of operation. Depending on the age and mileage, you could pay anywhere between $30,000 and $80,000 for a reliable big rig.

Another option is to rent or lease a truck, but this can get expensive very quickly. Used trucks may lease for around $800 a month while new rigs may lease for up to $2,500 a month. Oh, and don’t forget about the insurance costs, too, which can run as high as $1,000 a month.

When financing or leasing a truck, expect these costs to make up around 16% of your total truck operating costs. 

3. Crew

If you’re going solo, you only need to pay yourself, but if you’re looking to scale, here’s what you can expect. A trucking business crew has truckers, maintenance workers, logistics coordinators, dispatchers, accountants, attorneys, administrative staff, recruiters, trainers, and more. As a small business owner, you may wear multiple of these hats from time to time. However, as you scale, you may hire full-time employees, freelancers, or subcontractors for any one of these positions—it all depends on your business plan and strategy.

If you build a large fleet of trucks, you may hire in-house maintenance workers. Or you may choose to outsource all your maintenance and repair work—it’s entirely up to you and your unique situation. The same is true for your truck drivers. On average, drivers’ salaries make up over 43% of the costs of operating a trucking business.

4. Equipment

Depending on your trucks and the industries you serve, you may need to buy and maintain a variety of additional equipment. For example, if you’re transporting frozen goods, you’ll need to purchase temperature-controlled storage containers. If you transport logs, you’ll need a specific bed and ties. Or if you carry hazardous cargo, you’ll need specialized equipment.

This specialized equipment usually has higher costs, and it’ll also require unique cleaning and maintenance. Keep these additional costs in mind if you choose to work with less-competitive niche markets.

5. Fuel

If you thought the gas price for your private vehicle was bad, then you’re in for a big surprise. On average, a commercial truck will burn through at least $70,000 worth of diesel fuel per year. That’s a lot of fuel (and a lot of money)! On average, fuel will account for around 22% of your total truck operating costs.

There are plenty of tips and tricks to cut fuel costs, but it’s still going to be a massive expense for every one of your vehicles. You have to spend money to make money, right? 

6. Tolls

This expense might seem insignificant in the grand scheme of things, but toll fees can add up. Toll charges have skyrocketed over the last decade, increasing by close to 75%. Depending on which study you look at, toll prices could be your 2nd or 3rd biggest operating cost (alternating with fuel). It all depends on where you operate and which routes your drivers frequent.

A tool like Tollsmart can help you plan your routes and predict your expenses—this practice will help you accurately invoice your clients so you get the most bang for your buck. Other tools, like Bestpass, will help simplify your toll management expenses and help you find excellent discounts.

7. Repairs and maintenance

Alternators will break, tires will puncture, wiring will need to be fixed, breaks maintained—there’s a lot that goes into sustaining efficient trucks. Repairs and maintenance costs average around 10% of your total truck operating costs ($15,000 annually). Tire repairs and maintenance cost around $4,000 annually per truck on average, and that doesn’t take into account when you’ll need to replace some tires completely.

Increasing labor rates, parts costs, and replacement tire prices caused maintenance expenses to increase by up to 5% in 2018, and that number will likely keep steadily rising. Keep that in mind as you create your financial forecasts for your operating expenses.

8. Licenses and permits

As you can expect, you’ll need several licenses and permits to transport massive trucks full of cargo across the US. This post contains an excellent checklist, although you may need additional licenses depending on your home state and if you’re transporting unique goods. Here’s a quick list for reference:

1. Business Registration
2. Commercial Driver’s License
3. Federal DOT and Motor Carrier Authority Numbers
4. Unified Carrier Registration (UCR)
5. International Registration Plan (IRP) Tag
6. International Fuel Tax Agreement (IFTA) Decal
7. BOC-3 Form
8. Standard Carrier Alpha Code (SCAC)

Depending on the kind of cargo you’ll be hauling, you may need additional license endorsements. For example, if you’re transporting “hazardous” material (meaning explosives, combustibles, flammables, gases, and other potentially dangerous goods), you’ll need a HAZMAT endorsement.

Total, you’re looking at a few thousand in annual expenses for licenses and permits.

9. Insurance and taxes

Like with most insurance plans, you’ll pay a different amount for varying degrees of coverage. Your basic coverage will be cheaper, and your more comprehensive coverage will be more expensive. Obviously, you’ll also pay more if you’re insuring newer vehicles. It’s better to be safe than sorry, but you’ll need to decide which coverage packages will most benefit your business.

The government puts some heavy taxes on the trucking industry. The Heavy Vehicle Use tax and permit, as well as state-specific taxes, could cost you an average of $500 per truck annually. 

10. Marketing

You could argue that trucks market themselves, and we wouldn’t entirely disagree, but you’re going to need some additional budget to market your business. First, let’s start with branding.

At a bare minimum, you’ll need a name, logo, color scheme, social media profiles, and a website. Of course, you can always go deeper and wider to create an impressionable brand, but you’ll need these basics. Unless you’re decently design-savvy, you’ll likely need to hire a freelancer to lend you a hand.

Next, decide which clients you want to work with. Do you want to work with construction companies, large corporations, small businesses, the timber industry, oil and gas companies, or manufacturers? Once you know who you’re targeting, then you can decide how best to reach them. That strategy might include social media ads, Google display ads, brochures, email marketing, cold calls, etc. If you lack marketing experience, you might want to get some advice and help from an agency.

Start preparing a cash cushion early on.

You'll want to start preparing a cash cushion to deal with any unexpected disaster on day one. The trucking industry is a fun one—every day is different, and you'll deal with a variety of challenges week in and week out/ But it's also rife with risk. Truckers will suddenly quit, tires will blow, trucks will crash, clients will delay payments—there's a host of things that can and will go wrong.

By building a rainy day fund, you'll have the capital you need to deal with any challenge. When you're just starting and cash is low, consider getting a business line of credit. A business line of credit is a financial safety net that's there when you need it, but you're under no obligation to use it. So if you need to fix a truck's engine immediately or hire an additional trucker, you'll always have the cash you need on hand.

Find the right financing solution.

With all this talk of money, money, money, you’re probably starting to worry about how you can afford everything. Don’t panic! Getting a trucking business off the ground takes a lot of cash, but lenders understand the investment and know it’ll pay off in the end. That’s why they offer some fantastic financing options for transportation businesses. Let’s look at a few options.

• Equipment financing: With trucks costing upward of $150,000, you’ll likely need some financial help to get your feet off the ground. Truck cabs, beds, your coffee maker, and even the software on your computer—equipment financing can help you afford it all. With loan amounts up to $5 million and terms as long as 5 years, there’s no better way to finance your big rig fleet.
• Term loan: You can use a term loan to finance just about any part of your business. You’ll get a lump sum of cash with transparent rates and terms, so you know exactly how much you’re paying every month.
• Short term loan: If you need money, and you need it fast, a short term loan could be your best option. You’ll pay a higher interest fee, but you’ll get the money you need in as little as 24 hours.
• SBA loan: The US needs the trucking industry, and that’s why the government offers a suite of loans with top-notch rates. Qualifying is difficult, and the process is long and tedious, but if you qualify, an SBA loan is a stellar financing choice.