Launch a Trucking Company, Even When You Have No Money
A trucking company is a lucrative venture that requires a substantial amount of startup funding. And, while many people would like to get into it, they have no idea where to start — especially when they have no money to launch.
Here, you’ll learn everything you need to start a trucking company, even when your initial resources are limited.
- Projected startup costs based on the number of trucks
- A step-by-step action plan for getting off the ground
- How to raise funding when starting from ground zero
Now, let’s look at what it takes and you can decide if you still want to start a trucking company (It’s not for the faint of heart, but you can learn how to maximize your resources).
How Much Does it Cost to Start a Trucking Company?
Depending on the number of trucks you want on the road, where you plan for them to drive, and the other personalized details of your business, it can cost a minimum of $27,357 to $406,979 to launch a trucking company.
Of course, these costs can vary wildly based on many different factors. So, you’ll need a budget and a plan. Hopefully, that’s where I can help. Step-by-step, I’ve outlined how to start a small trucking company, even if you have no money to put down.
Before We Start, Let’s Get an Overview of Your Plan
You’ll need to ask yourself a few crucial questions before you get started. Don’t worry, though. They’re easy to answer and you can always change your mind later as your company grows.
Where will you base your operations and where will you haul?
Your base location and the states you will drive through are crucial to know before you launch. If you will never leave your state, you can get by without some of the licensing and costs associated with hauling across state lines.
For example, with interstate freight, hauling across state lines, you will need motor carrier authority or an MC number, which we’ll cover later. And, for intrastate freight, hauling only within your base state, there are typically fewer requirements.
So, if your operations are isolated to your home state, you can skip over the MC number section for now. You can acquire authority later if you choose to expand your operations.
Will you drive for your company?
If you plan to drive for your trucking company you will need more licensing. For a one-truck operation, driving could save you on the cost of an employee salary or payment to a contractor. However, you will need a commercial driver’s license (CDL), which takes some work.
While a trucking company owner is not required to maintain a CDL, each driver is. This type of license can be acquired through your state DMV, and each of your drivers is required to keep a valid, updated CDL at all times.
Will you hire or contract your drivers?
While there is no rule to how you set up your operations, you need to consider whether you would rather hire employees or work with contractors. Either way, one of the most difficult parts of your job, when you try to scale your business, will be to build and maintain relationships with drivers who are qualified.
Look for drivers with the following qualities:
- Good temperament
- Careful with equipment
The paperwork associated with contractors will typically come with less hassle than employees. Yet, the potential to provide benefits to employees can sometimes nurture ongoing and profitable relationships.
Now, let’s look at the steps you need to take to start a trucking company.
Step 1: Acquire a Business License
The first step to take is to acquire your business license. And, you will have options.
In the US, there are four types of business structures/entities to choose from.
- Sole proprietorship – an unincorporated business owned by one person who has sole rights to business profits and liabilities.
- Partnership – an unincorporated business owned by two or more people who share equal rights and responsibilities to business profits and liabilities.
- Limited Liability Company (LLC) – a business that includes elements of a sole proprietorship, partnership, and corporation in which the owners are not personally liable for the company’s debts or liabilities.
- Corporation – a business that is legally separate and distinct from its owners who act as representatives for the company. A corporation’s owners are not personally liable for the company’s debts or liabilities.
I usually suggest that trucking companies go with an LLC because it gives business owners many of the same protections of a corporation with the ease of a sole proprietorship or partnership. You may be able to have your licensing fees paid by leveraging an economic development grant.
To acquire business licensing, go to your state’s Secretary of State website for more information.
Step 2: Get Your Commercial Driver’s License (CDL)
If you will be driving, you will need to obtain a CDL, which is a required license for anyone driving commercial vehicles like tractor-trailers, semi-trucks, dump trucks, and passenger buses.
To obtain a CDL requires education, exams, and fees. There are some states that will allow you to obtain a CDL without schooling, but you will still need to pass an exam.
The courses offered are often 5-7 days and sometimes 60-90 days. The longer courses can cost upwards of $1,200, but you can get these courses paid for in a couple of different ways.
- Apply for an education grant through the federal government.
- Get a trucking company to train you in exchange for a contract to work for them for a certain number of months at a low compensation.
So, be sure to check into the financial aid programs offered by your local community college and trucking companies in your state to obtain a CDL.
Step 3: Apply for an Employer Identification Number (EIN)
After your business is licensed, you’ll need to apply for an Employee Identification Number (EIN). An EIN is a free, nine-digit federal identification number assigned by the IRS for business taxes and reporting.
Your EIN will be used to file taxes, report business income and expenses, and apply for and establish credit on behalf of your company.
Resource: IRS Free Online EIN Application
Step 4: Sign Up for a DUNS™ Number
A DUNS™ or D&B number is a free, nine-digit business identification number assigned by Dun & Bradstreet’s business credit reporting agency to establish your company’s credit profile.
Your DUNS™ number will be used to apply for and establish credit on behalf of your company.
Step 5: Hack Your Business Credit Profile
Funded businesses achieve 2X more employment growth and 30% more revenue growth than businesses that do not have adequate capital at launch, according to Kauffman. When you learn how to hack your business credit profile, you can obtain up to $100K in funding in as quickly as a month.
Personal credit is limited and cash flow is a gamble. Make sure you have adequate capital because, in the blink of an eye, you can go belly-up if you are under-capitalized.Brendan Purnell, Founder of A2B Trucking
Brendan Purnell, the owner of A2B Trucking in Snellville, Georgia, was able to obtain over $200K in business credit over the course of six months. The financing he obtained substantially impacted the vitality of his company.
He’s now operating a business with 10 trucks and a team of 12, including 10 contracted drivers, Purnell’s fiance doing administrative work, and himself. And, A2B is in a position to let others lease into the trucking company for a period of months to learn the ropes.
A strong credit profile isn’t the same thing as bad debt. And, if you’re serious about building a successful company, more capital can help you achieve your goals.
Step 6: Obtain Your Equipment
Once business credit is established, you can start truck shopping. Even if you aren’t in a position to qualify for a vehicle loan, there may be other ways to do so.
For example, you may be able to purchase a used truck (very inexpensively) on eBay with a credit card.
While it’s less likely that you’ll actually be able to drive something that costs nothing, you never know what you might find for free on Craigslist.
But, while these options are available, I wouldn’t necessarily recommend them. Your trucks should be a long-term investment. I’ve heard a rumor that there were hundreds of trucking companies that went under last year. So, it may be the perfect time to get a rig at liquidation prices.
Once your business credit is established and you can look more closely at your resources, you’ll be able to make more informed and personalized decisions about how to buy fleet.
Resource: 5 Tips for New Owner Operators Buying Your First Truck
Step 7: Acquire USDOT & MC Numbers
Next, you will need your USDOT and/or MC numbers issued.
A USDOT or DOT number is a license number required for all commercial vehicles that weigh a certain amount, transport people or property, and operate between state lines. A DOT number is free.
An MC number is a license that enables trucking companies to legally carry regulated commodities (anything that has been changed from its natural state) across state lines. An MC number is $300. If you need help paying for the license, an economic development grant may help cover the cost.
Both licenses are issued by and can be obtained from the Federal Motor Carrier Safety Administration (FMCSA).
Resource: FMCSA Registration Wizard
Step 8: Activate Your MC Authority
After registering with FMCSA for your DOT and MC numbers, you will need to activate your authority. This requires two parts
- Submit Proof of Liability Insurance – proof of commercial auto insurance coverage needed within 90-days of applying for MC authority.
- BOC-3 Filing – designates processing agents to act on behalf of your processing company in each state in which you will operate.
A processing agent is a person who can receive legal documents for your company in the case of a lawsuit. The cost for the BOC-3 filing starts at about $20. Depending on the agent, you may be able to bypass the cost. Ask your agent if their service has any type of fee waivers.
Resource: FMCSA Process Agent Directory
Step 9: Get Cargo Insurance
Cargo insurance provides coverage for freight. While you are not legally required to maintain cargo insurance, it will be required by most brokers and shippers. You will need to submit proof that you carry this type of coverage before you can get hired to haul.
As with all types of insurance, you should get multiple quotes for cargo coverage and choose the best option. If you already know the brokers and shippers you will work with, ask for recommendations from them and find out what their coverage requirements are.
Resource: Cargo Insurance: What is it, What are the Types, and Do I Need it?
Step 10: Obtain Your Unified Carrier Registration (UCR)
A UCR is a required federal directory of carriers, that replaced the Single State Registration System (SSRS). The collected fees are used to support state safety training and USDOT officer training.
Any trucking company with interstate operations must register, even if based in a state that does not participate. Non-Participating states include Arizona, Florida, Hawaii, Maryland, Nevada, New Jersey, Oregon, Vermont, Wyoming, and the District of Columbia.
Fees start at $60 for a company with up to two trucks, plus a $75 application fee. For help paying your UCR fees, an economic development grant may help you out.
Resource: UCR Online Registration
Step 11: Apply for Apportioned License Plates
Apportioned license plates distribute licensing fees equally between each state a truck passes through. And, they are required for all commercial vehicles that travel between states and weigh 26,000 lbs or more.
Apportioned plates are governed by the International Registration Plan Organization (IRP). And, you can obtain more information about getting your plate(s) on the IRP website.
Resource: IRP Organization’s Website
Step 12: Register for Your Quarterly Fuel Taxes
Your quarterly fuel taxes are dictated by the International Fuel Tax Agreement (IFTA) and the International Fuel Tax Association. You will need to register with and order decals from your state agency that administers IFTA regulations. All trucks must have an updated IFTA decal to be in compliance.
Resource: US State Website Directory
Step 13: Research Other State-Specific Registrations
Do the research within your state and find out which state-specific registrations may be required. For example, depending on where you are located, you may need to apply for intrastate authority. And, Kentucky, New Mexico, New York, and Oregon require a weight-distance tax. Contact your local DMV or state department for more information.
Now that you have the process outlined, you’re ready to launch. Just start networking to find your next job or driver and get on the road! And, if you need help getting financed from zero, find out how to get $100K in business credit without walking into a bank.