Avoid Bankruptcy: What Trucking Companies Can Do

It’s no secret that many trucking companies have been struggling financially for the past few years. Whether due to the record-high operating costs, unplanned costs, market conditions or a wide range of other reasons, many companies (particularly smaller operations) are being pushed out and forced into bankruptcy at an increasing rate.

While companies can certainly overcome financial hardships and remain in business despite filing for bankruptcy, there’s a reason why it’s typically used as a last resort. The bankruptcy code affords protection to those in debt and allows for a second chance to reorganize the company’s debts. The downside, however, is that it’s a drastic step that will impact your company’s credit for years to come. Additionally, doing so will also make personal financial information public and potentially force your organization to liquidate assets.

If your trucking company is one of the many facing financial struggles, you do have options other than filing for bankruptcy. Read on to learn more about how your business can protect itself and stay on the road.

How Trucking Companies Can Protect Themselves from Bankruptcy

For any business to survive, it’s important to have plans in place to prepare for the worst. Trucking companies especially need to “future-proof” their business to help them stay afloat when times get tough. A few ways that fleets can do this include the following:

Diversify your broker portfolio.

As tempting as it may be to rely on a few sources of (seemingly) steady income, doing so can be very risky. Your company is essentially tying its future to the success of only a couple of customers. If one of them is struggling financially or goes out of business, it could send your business scrambling to replace that revenue.

That’s why it’s a good idea to continually try to add new customers. Not only that, but your company should also closely monitor the customers it does have by regularly checking broker and shipper credit ratings. Ideally, no single customer in your book of business should make up more than 20 percent of your company’s total revenue.

Negotiate insurance and equipment costs.

Knowing when, where and how to negotiate can potentially mean saving thousands of dollars each year. For example, insurance and equipment are among the largest organizational costs trucking companies face each year, with insurance premiums in particular having increased by nearly 50 percent in the past decade. Doing your research, looking at all available options, keeping track of documentation and leveraging open negotiation periods can help companies avoid leaving money on the table.

Negotiate driver pay.

Obviously driver pay is another area where trucking companies can negotiate to save money. Pay cuts or salary reductions may seem like a good way to quickly reduce costs, but the potential consequences (increased turnover, lowering morale, etc.) are reasons why this option should only be used as a temporary, last resort. In fact, increased turnover can actually cost companies more in the long run.

Instead, look for opportunities to negotiate in a way that’s beneficial to both the company and the driver. There are other ways to compensate employees outside of salary, such as offering unpaid time off for personal and family needs. Companies can also invest in employee development and training programs to reduce turnover.

What if Filing for Bankruptcy is the Only Option?

The strategies listed above are a great way for trucking companies to protect themselves and avoid filing for bankruptcy during hard times. But what should you do if your business is already at that point?

If bankruptcy appears to be your company’s only viable solution, it’s important to make sure that you discuss your options with professionals before beginning the filing process. At RTS Financial, for example, our team can help trucking companies by assisting in filing through Chapter 11 bankruptcy.

During this process, we can provide “debtor-in-possession” (DIP) that allows businesses to continue operations while the court works out a payment plan. During this period, our team provides bankruptcy relief by factoring receivables without companies having to pay creditors or liquidate assets. This process also lets your customers, vendors and suppliers know that your company will be able to continue normal operations and make payments while it reorganizes.

It’s important to note that RTS Financial and other companies can only provide this BEFORE you file for bankruptcy, though. DIP financing is a long and complex process that requires approval from the court, judge and U.S. trustee, meaning there’s little we can do to help once trucking companies have already filed.

Other Ways RTS Financial Can Help

Whether you’re concerned about your company’s current financial situation or are simply looking for ways to minimize costs and maximize available funds, RTS Financial offers customized solutions for trucking companies nationwide.

Our team can boost your company’s cash flow by providing funding assistance for:

Insurance renewals
Large equipment purchases
Property down payments
Tag renewals
And more!

There are a number of organizations out there that will take advantage of a company’s financial struggles through predatory loans and risky lending practices. Beyond helping trucking companies maintain a healthy cash flow, working with RTS Financial helps ensure that you’re working with a reputable company with stable financial solutions.

Additionally, we offer several services designed to help fleets gradually save their money over time. Our factoring services ensure same-day funding on invoices with no hidden fees, while our fuel card and truck care programs offer significant discounts on diesel and preventative maintenance at locations within our nationwide network.

And remember, regardless of your current financial situation or the unpredictable nature of the trucking market, these things are always cyclical. Even if filing for bankruptcy seems like your company’s only option, things will get better. Conditions will eventually improve, and the RTS team will work tirelessly to help your company make it through.