How to invest in loans
Investing in loans is not for everybody (because of the risk) But I have found it to be a great source of passive income for my clients if managed correctly. The truck and freight business is equipment heavy and always needs large infusions of cash to keep them humming along smoothly. Investing in loans the traditional way, involves buying stock of banks or lenders that make loans to Truck Buyers. Or you actually becoming a representative of a direct lender yourself and selling or buying loans. However there is another huge under culture of financing for the truck market. Debt Collection and Invoice Financing or Buying. Investing in loans in the truck business is more like a debt collector, buying invoices and receivables. But if guided by an expert in the field, this is a great way for a person with little knowledge of the trucking business, to invest funds as a passive investor, and reap nice ROI’s. So, investing in loans related to the trucking and freight business can be a smart move for an individual investor working off a laptop and a group chat on their phone. Most of the larger and institutional investors like banks and other lenders, only lend funds to established long standing businesses and ignore the “smaller and medium sized operations” (no small mom and pops or start ups please!). In this article I will talk about the streams of opportunity by investing in loans or buying debt in this smaller, but just as lucrative, under served market.
One of the main advantages of investing in loans related to the trucking and freight business is the potential for strong returns, backed by an actual asset..the truck and equipment. The trucking and freight industry is a vital part of the global economy, and companies operating in this space tend to have a provable cash flow. So, it makes more sense to invest in these types of established truck companies that are already generating income…whether they are on the equipment side or services side.
But How ?
You have real estate mortgage loans you can buy and invest in. You have automobile loans you can buy and invest in. There are literally so many different types of ways to make money by investing in loans. But I’m about trucking so I want to tell you few ways of investing in loans as its related to trucking, freight and logistics.
First you have the most hated of loans….the dreaded title pawn loan. A title pawn is a type of short-term loan where a person uses their vehicle as collateral. Typically this is an operator who owns his own truck. He/she gets stuck in a financial rut and they have to raise cash quick…so they turn to a title pawn company. The title pawn company may loan the owner of the truck, $3-20K or more, depending on the value of the truck. Now the title pawn company has the title and can actually take legal ownership of that truck in 30-120 days, depending on the terms of the title lien and any other contracts or agreements in place. This can be a tempting option for truckers looking for quick cash, because they know they are in ownership of a big rig valued at $20-100K or more. Sometimes you see these ads on craigslist, where a title pawn company has semi trucks on their list that they are trying to sell. But most of the the time, they would run the truck thru the locale truck and heavy equipment auction (and earn way more profit than the value of the actual title loan). So, as a passive investor you can either buy these loans from the title pawn company or start your own title pawn business. However, a title pawn loan business is based on a retail operation and not suitable for the average investor who wants something with a much smaller footprint.
Another type of loan investment in the trucking and freight business is known as invoice financing, also known as accounts receivable financing or commonly called factoring. This type of loan allows trucking and freight companies to borrow (or even out right sell) against the value of their unpaid invoices. Most invoices in this business are 7-60day receivables. From the investor view, many would argue that you are not actually investing in a loan, you are really investing in a debt (the receivable). But in my crazy mind, I see buying a debt the opposite side of the same coin as investing in a loan or selling an invoice. The factoring company in most cases is lending the trucking the funds with a contract stating that if funds cannot be recovered by the shipper, then the trucker has to repay back the factored funds. This hardly ever happens, but it does. Of course, a trucking and freight company may choose to out right sell this invoice at a reduced rate of 2-8% of the total and receive funds within 24hours. Factoring is very common in the industry, with a lot of large players. Many smaller to medium sized truck companies use factoring because it provides them with the cash they need to operate and grow their business without having to wait for their customers to pay. Now, it’s difficult to invest in “loans” directly with these established companies. But you can set up your own factoring company and market directly to owner operators. If you have the ability to get a bank line of credit, then you can start your own factoring company. The risk is of course on uncollected loans. I would not recommend a newbie to invest in loans from this angle. It leaves you too exposed to suppliers who might not pay a bill and now you are holding the bag and fighting with an insurance company.
Buying invoices from Diesel Mechanics is another way to invest in loans as its related to trucking. An investor is contacted by a Diesel Truck shop saying that they have an over due invoice past due 30 days. The investor offers to buy the debt (the outstanding invoice) from the truck shop and settle up directly with the actual owner of the truck. The investor pays the mechanic and now the investor files a lien on the truck title and then contacts the owner for payment. This type of method in not really investing in loans, but you are more of a debt collector, however I put it in the loan category, because you are accruing a daily flat rate on top of the original bill. This flat rate is usually a charge for storage rate or whatever. But I felt like I had to include it because it reminds me so much of the title pawn loan industry and is not heavily regulated. So investors that operate in this space are making some nice returns.
But what if I could offer you a safe way to invest in loans while also reaping the financial rewards of the above three examples? My company specialized in all 3 business models, and have a few openings for creative thinking individuals who want to invest in loans. These loans are just tied to the trucking and freight industry which I am a part of and work with a team of experts on. I used to drive over the road as well, currently have a CDL A, and so I bring a different perspective to this business model as well. So if this sounds interesting and you want to see how you can earn guaranteed return of 20-60 ROI, contact me right away.
Investing in loans related to the trucking and freight business is not the usual option you hear or seek advice on. It always stocks, bonds or real estate. But within the trucking industry, there is a unique opportunity….because while you can invest in many types of loans, these logistics based loans are based on vehicles that have strong potential revenue generating power and have strong relative resale value. An average semi truck unit with a regular box trailer can generate $8-10K weekly and net its owner $2-3K weekly after all expenses. If the owner is also the driver, then he/she retain the driver pay too (another $2K or so) Not too shabby. My company can provide this safe haven for you to invest in the logistics industry and guide yo to healthy ROIs. Investing in trucking provides you with way more safety that crypto and other programs Because with trucks and freight are an essential part of tis economy, delivering goods to business and residents all around this nation…, you can invest in loans and your funds are based on actual equipment that can be liquidated in a financial emergency. Now how kool is that?!
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Gerard Fairley