Minimum Cash-in-Bank Before Starting

Factoring is what they call it when you sell your accounts receivables and get your money within a couple of days. The average that I have seen is 5% for non-recourse. This is sold as if the broker or shipper does not pay they will not come after you. But lots of loop holes in this and a whole different topic on pros and cons. Clearly the biggest con is the expense. That is 5% for a 30-45 day loan. If you are a Ramsey guy you will right away see this as a HUGE negative. They also have recourse that I have seen for 2% range.
I don't factor so not one to give a lot of advice on best ones to work with. But if you don't think you will be doing this don't just sign-up with one as a back-up. Because you can only work with one factoring company at a time and most charge fees to be released. And if you start reading and UNDERSTANDING the contracts you will like run.

 

I just wanted to chime in here. Alot of questions about how much money someone needs to start as a OO. I think it depends greatly, if I would of waited to start till I had 10k set aside I would still be waiting. One major question is how much maintenence and repair work can someone do on there own. I do all my own work and it saves countless amounts of money. I had never inframed a engine before but I have now. Its surprisingly easy to learn how to maintian and repair your own equipment. I dont think there is to many people in the country especially working types who want to get into trucking are ever going to have 20k or more to start with. Sometimes you just got to take a leap and hope for the best. There isnt a business in the world that cant fail with the right breakdown or accident or whatever. Some just on a larger scale. Anyone starting a business is risking there own neck. I hate to ramble about this but crap I just dont know where some of these numbers come from.

Also factoring isnt a horrible thing. Most are at 5percent so on a 2k freight bill its 100 buck. I think thats a fair rate for the risk they take. They dont make you factor every bill everytime its up to you. When I started I had a old pete and very little money and that was 3 years ago. Without factoring I couldnt of made it. What I did was just factor only the bills I needed the money for right away waited on the rest of the payments to come in most within 30 days and after about a year I dont have to factor now. Yeh I gave up quite abit of revenue but it got me stable in this tough business.

Also on putting your maintenence fund in a seperate account just make sure its easily accessible. As stated by many its not if your gonna break down but when. So just make sure the money isnt somewhere its gonna take more then a day to get.

Hope I wasnt ranting

 

This is the main reason you need money before buying a truck. If you had to borrow $150 for fuel to get started, I would be interested to know how you paid for the in-frame on your first run out? An in-frame will usually run between $9,000-18,000, depending on the brand and what needs to be replaced. You either need enough cash to do an in-frame or good credit or access to enough money to do an in-frame. If you don't have the money in hand or access to funds and have a major break down you are out of business. When that happens, you will usually lose your truck and ruin your credit, providing your credit was good prior to buying the truck. If nothing happens. great. But, when you are in business things happen. Unless you are prepared you will fail. Most people may not have their engine go out on their first trip, but you should be prepared just in case. When you are prepared, you can get the truck repaired and continue about your business. You could lose about a week in revenue, but you will still be in business.

 

Years back when I bought my first truck , I looked at a FRLR COE , big bunk , 400 HP , decked out ( but ran ragged ) ex O/O tractor.

Passed over it and bought a FORD W series COE.

Guy I knew bought the FRLR next to no downpayment, company he hauled for issued POs for repairs , he thought this was great.

He fixed a lot of stuff with no $ in his pocket , bills added up and before long he owed $20,000.00 in repairs , tires , dressup , $15,000.00 on the truck and still no $ in his pocket.

 

Funny most guys suggest 10k in saving before starting out yet all the repair bills seem to be 20k or more. So with your guys advice the drivers will still fail. Using a inframe as a example of a way to be out of business isnt good. A engine can need a rebuild and still run for lots and lots of miles. Someone who has ran a truck for many years should of known that.
Anyone can come of with examples of why someone has failed in starting a business wether poor money management or not enough overhead and so on. But maybe we should start a thread of folks that started with nothing because I guarantee there is alot more out there.

I am not saying you should start with absolutely no money, my point is the amount needed may be drastically different. Odviously Gman doesnt do his own repairs so he may of needed alot more money to start out. I for one started with a older pete no emission controls and so on so very easy to work on and was very cheap to work on for the most part.

 

It doesn't make much difference if you do your own repairs or not. If you lose an engine on the road, you will find it difficult to do a rebuild on the side of the road. You will most likely need to find a wrecker to tow the truck to a repair facility. You will probably say goodbye to at least $1,000 for a wrecker. Unless you have the tools to rebuild, you will need to hire someone to do the work for you. To give you an example of what it costs if you breakdown I will share something that happened to one of my trucks about 2 or 3 years ago. The transmission came out in New Mexico. I had to get it towed to Albuquerque. I paid $954 for about 100 miles. My truck was down for almost a week waiting on a new transmission. By the time I paid for the tow, parts, labor and putting my driver in a motel I spent (I believe) over $7,500. Another time I blew 3 tires on one trip. blew a radiator hose and had to repair the radiator. This was literally a trip from hell. It didn't take too long with the tires. I had a couple of tires on the truck so I only had to purchase one. The truck was down for 2 or 3 days waiting on parts. I spent almost $1,000 to have the radiator repaired.

It is good if you can do most of your own repairs. I used to do many of my own repairs. If you blow an engine you will likely spend at least $3,500-6,500, just for parts. I can guarantee you that 9 times out of 10 that when something happens it will happen at the most inconvenient time and often on the road. Unless you can find a place to work on your engine yourself and have all the tools, you will need to pay someone to do the work for you. In any case, you will probably have a wrecker bill, parts and perhaps have to pay someone to use their garage. You could have the truck towed home, but if you are 1,000 from home, you will have quite a wrecker bill.

I blew a turbo on a truck a couple of years ago. We didn't have a wrecker bill, but the turbo alone cost over $1,500. Labor, oil change and everything cost a little over $2,700. I also had to rent a truck to complete a commitment on a couple of loads. I think I paid about another $500-800 for the rental.

I could go on with things that have happened to me on the road. It is one thing to replace an alternator or starter. It is quite another to take a radiator out, replace a turbo, change out a transmission or clutch or rebuild an engine. There are many things that can happen on the road. You can take a chance without any money. If you blow a tire, you might find a worn out used tire for about $200-250. A new tire could cost $500-600 plus having road service come out if you cannot make it to a tire shop or truck stop.

You need to prepare for the worst that can happen in business. You might get lucky. If you don't, then what? You are out of business.

 

I remember back in the late 60's and early 70's you could find diesel for $0.17/gallon. Engines didn't usually last as long back then, but it was a lot cheaper to rebuild them. Regardless of how you finance your business, you need to have a plan. I don't like using credit, but it can work in an emergency. You are rignt, it does help if you don't have any breakdowns. The problem is that you never know when the truck will break.

About the cheapest over haul that I have heard of recently is about $10,000. I run CAT engines and they can run $18,000 to rebuild. A friend of mine paid just under $10,000 to have his N14 rebuilt last year.