Financing Options for Logistics Start-Ups: Everything You Need To Know
Logistics companies ensure the timely movement of goods to the right destination. This is their primary role, which is crucial to the success of many other businesses. For a logistics business to get off the ground, the pros and cons of the available financing options need to be evaluated and a prudent choice needs to be made.
If you have been planning to start a logistics business, this is the right time. The logistics business is set to see good growth. The CAGR is projected to be 6.3 percent for the period between 2023 and 2028. With the help of these financing options, you too can take advantage of the growth opportunities in the logistics industry:
Bank Loans:
Bank loans are a reliable source of funding. With these, a start-up can avail of a lump sum amount. It can help a logistic start-up acquire essential assets like warehouses and transport vehicles. To secure a bank loan, you need to be prepared with an excellent business plan, detailed cash-flow forecasts, and business projections.
Banks want to avoid risks as much as possible, so they may be sceptical about investing in a logistics start-up. Many banks prefer putting money only in established companies, as they are able to assess future viability based on past performance. You can opt for a start-up loan if you face difficulties in securing a bank loan.
Start-up loans:
In a bid to help start-ups, the government initiated start-up loans. If your business is less than two years old, then you may be eligible for a start-up loan. You can borrow up to £25,000, and repay it over a period of five years. This loan is a personal unsecured loan. For obtaining this loan you would have to pass a credit check. You will get help in drawing up your business plan. There are however quite a few benefits to this option. You don’t have to pay any kind of application fee, and you can avail of free mentorship.
Commercial mortgage loans:
Commercial mortgage loans are an excellent financing option for logistics start-ups. In this option, the loan is secured with a deposit. For deriving the maximum benefit from this option, the key is to negotiate the largest possible loan for the smallest commercial mortgage deposit. The deposit is usually between twenty and forty percent, but it could vary depending on several factors.
Crowdfunding:
Crowdfunding brings together businesses and passionate people. In other words, it helps connect the entrepreneur with the right investors. In this financing option, a large number of people contribute a small amount of capital each. A startup that requires money can create an internet campaign to raise the required funds.
Business incubators and accelerators:
With a business incubator or accelerator program, a logistics start-up can get access not only to funding but also mentorship and other resources. Popular programs in the UK include Techstars London, Seedcamp, and Wayra. Logistics and supply chain management comprise special tracks and focus areas in these programs.
In conclusion
These are by no means the only financing options available to logistics start-ups. This article was meant to shed light on some of the best financing options available. Procuring finance from a good source is just the beginning. The success of the business will depend on how well the funds are managed and utilised.
Advance your logistics business with IoSCM. Whether you are a start-up or a multi-national, our range of professional qualifications can help you get the results you need to succeed.
Call 0800 1422 522 today to find out more.