Yellow cabs and taxis don’t just run on fuel. They also need capital to chug along. Whether you need to purchase another taxi for your fleet or simply have cash on hand for emergencies, taxi finance could help.
How Financing Can Help Your Taxi Business
Every city in the country has taxis, from New York City to Miami. And every one of those taxis is part of a taxi business that has its fair share of expenses.
If your business is in a city like NYC, you may be required to carry a taxi medallion, which can run taxi medallion owners thousands, if not hundreds of thousands, of dollars. But it could be worth the expense: being a medallion owner-driver could help you get support from local medallion organizations. A taxi medallion loan could be what you need to get in the game and stay competitive.
Small business loans for taxi companies can also help cover day-to-day expenses when business is slow. You need to ensure that you can always pay your staff and afford overhead, and a loan can bridge the gap to better times.
The coronavirus pandemic has impacted millions of businesses, including taxis. While we’re getting back on our feet, you may still have expenses to get back to your former days of glory, and business financing can help with that.
The Best Loan Options for Taxi Businesses
There are a variety of financial services and lending products available to your taxi business. Some require higher credit scores and qualifications than others, so find the one that offers you the best rate for your financial situation.
Working Capital Loans
If your credit is good, you may qualify for long-term financing at good rates through a bank or credit union. Do shop around: the bank you’ve done business with for years may not offer you the best rate, and there are now online lenders who compete for low rates.
The Small Business Administration offers several low-interest loans to small business owners with long repayment periods. SBA loans can be used to purchase real estate and equipment (like taxis), as well as to use for working capital.
Line of Credit
Sometimes you don’t need a lump sum of cash all at once but prefer to have access to capital when you need it. In that case, consider a business line of credit. You get approved for a fixed amount, and you can borrow up to that amount at any time. Repay it and borrow it again as many times as you like.
Some loans require collateral, which you might not have. With equipment loans, which are great if you’re purchasing more taxis for your fleet, the vehicles serve as collateral. These typically have low interest rates.
It may be helpful to have business credit cards at your disposal. Authorized employees can use them to buy gas or office supplies, and if you have a rewards card, you could quickly earn back more than you pay in interest, if you pay your balance in full.
But what about the taxi business that can’t qualify for one of the above options? Not to worry. You’re not left out in the cold. There are short-term lenders who look at other factors besides your business and personal credit scores to qualify you for financing. Just note that these loans tend to have high interest, so you’ll want to pay them off quickly.
Merchant Cash Advance
Another option if your credit isn’t great is a merchant cash advance. It’s not a loan, but rather an advance on future credit card sales. Repayments are automatically deducted each day or week from your transactions, plus a fee.
How to Choose the Right Taxi Loan for Your Business
Cab drivers owe it to themselves and their employees if they have them to ensure cash flow is steady and they’re able to keep their fleet in tip-top condition. With so many loan options, it can be overwhelming to know which to select.
Start by asking yourself what your goal is. Why do you need financing? Is it to buy one or more taxis or just have a safety net in case cash gets low?
Next, look at your credit. SBA loans typically require a FICO score of 640 or higher, so if you don’t have that, you may need to explore other options. If your business hasn’t yet established its own credit, learn how to establish business credit so you can qualify for better offers.
Finally, plan for your repayment. How will you make that payment each month when you have other expenses? The biggest mistake business owners make is taking out a much larger loan than they can afford to pay back.
How to Apply for a Taxi Loan
Loan applications for businesses in the taxi industry may vary slightly. Some, such as those through the SBA or banks, may require financial documents like tax returns or profit and loss statements, while online lenders may only want a few details from borrowers.
Expect to be asked details about both your business and yourself. Lenders will want to know how long your taxi business has been in operation, and may also ask your Social Security number since you ultimately will be responsible for paying the loan if the business cannot.
Once your application is approved, you will be given terms for your loan, including interest and monthly payments. If you agree to the terms, sign the loan docs and wait for the money to hit your account.
Your loan payments will begin within a few weeks.
How Nav Can Help You Get a Taxi Loan
City taxi drivers must have steady cash flow. Gas prices will rise and fall. Business will ebb and flow. But one thing remains constant: the need to survive and thrive in a competitive industry. The right financing can help you do just that.
Nav lets you compare loan offers based on your qualifications. Get started and find the quality financing you need for your taxi business today!