Funding options for SME logistics operators
Funding options for SME logistics operators
Jan 28, 2025
The Sector
The logistics sector is one of the main engines of the UK economy, contributing over £180 billion annually and employing more than 2.5 million people. It consists of thousands of small and medium-sized enterprises (SMEs), including hauliers, courier services, and warehousing providers. These businesses play a vital role in our supply chains, from enabling same-day birthday-saving gift deliveries to the movement of critical goods that keep our economy and society functioning.
Despite steady demand for logistics services, SMEs in this sector face significant financial challenges. Rising costs, delayed payments, and an underwhelming response from traditional lenders have created a cash flow crunch that is stifling growth and operational efficiency.
Pandemic induced turbulence
The outbreak of the pandemic in 2020 brought unprecedented demand for logistics services, driven by a surge in online shopping. With high-street retailers closed, e-commerce flourished, creating opportunities for courier services, last-mile delivery providers, and warehousing firms. Many SMEs experienced rapid growth, expanding their fleets, hiring more staff, and scaling up operations to meet soaring demand.
However, this growth came at a cost. SMEs taking on debt to fund expansion made big bets on sustained demand. As restrictions eased and consumer spending shifted back to brick-and-mortar stores, many firms have grappled with oversized operations and mounting financial obligations. The post-pandemic adjustment has been particularly painful for businesses that expanded aggressively during the pandemic.
Rising costs
The logistics industry is heavily exposed to rising costs. Alongside the supply chain disruptions brought on by the global pandemic, global conflict, particularly the outbreak of the Russian invasion of Ukraine, has led to increasing fuel price volatility. At the same time, tighter restrictions on immigration since Brexit have led to increasing wages and soaring vehicle maintenance expenses. With tight competition and pressure to keep prices low, SMEs in the industry often find it difficult to pass these costs on to customers, ultimately compressing margins.
The scourge of late payments
Like most SMEs, small logistics firms frequently operate on extended payment terms, with invoices often paid 60–90 days after goods have been delivered. Smaller companies are more affected by delayed payments than their larger counterparts and are more likely to experience them, given the power dynamics favouring the bigger players in the supply chain. It’s no secret that payment delays are one of the leading causes of SME cash flow issues, which are growing more and more acute as costs grow. Help may be in sight, with the Government vowing to crack down on the ‘scourge of late payments’ and hold larger businesses to account. For now, though, millions of SMEs each quarter find themselves struggling to cover the essential bills to keep staff paid and the lights on.
Capital-Intensive Operations
Logistics businesses require substantial capital to purchase or lease vehicles, maintain fleets, and invest in technology such as route optimisation software. However, many SMEs struggle to access financing for these expenses, particularly if they lack physical assets to offer as collateral.
At the same time, logistics firms are under increasing pressure to reduce their carbon footprints. The UK government’s push for net-zero emissions by 2050 has brought stricter environmental regulations, including introducing clean air zones and incentives to transition to electric vehicles. While these initiatives are critical for long-term sustainability, they represent a significant financial burden for SMEs. The cost of upgrading fleets, retrofitting facilities, and investing in green technology is prohibitive for many smaller firms, especially those already struggling with cash flow.
Limited Access to Finance
Underlining each of these challenges is the fact that traditional lenders are often wary of the industry as a whole. Its relatively informal structure, characterised by short-term contracts and dependence on subcontracted labour or sole traders, increases the perception of heightened credit risk. Banks will often take a blanket approach and exclude smaller businesses as a result, regardless of the underlying fundamentals of the business.
Even when logistics firms can access finance, cash flow-focused products like invoice discounting or short-term loans are rarely tailored to the unique payment cycles of the logistics industry. In both cases, given the inherent seasonal peaks and troughs that characterise the industry, there’s the risk that funds end up sitting on the balance sheet accruing interest whether they are actually used or not.
When cash flow becomes an issue, logistics SMEs are forced to make difficult decisions. They may delay fleet upgrades, limit hiring, or scale back services, all of which can impact their ability to meet demand and compete with larger players. In the worst cases, cash flow challenges can lead to business closures, reducing competition and innovation in the sector.
Flexible Financing Options
Here at Lenkie, we have designed a solution that align with the operational realities of logistics SMEs. Our funding line is tied to specific costs—fuel, payroll, or fleet maintenance—and can provide a greater degree of flexibility, with repayment terms of anywhere between 1 to 12 months. It combines the elements of selective invoice finance, a term loan and a credit card to provide a tailored solution for logistics operators:
On-Demand Funding: Access funds when you need them, whether it’s to cover fuel costs, pay drivers, or invest in your fleet.
Flexible Repayment Terms: Spread repayments over 1–12 months, aligned with your payment cycles.
No Hidden Costs: With no arrangement fees or ongoing fixed costs, you only pay for what you use.
Whether managing rising costs, dealing with delayed payments, or planning for growth, Lenkie provides logistics operators with the financial flexibility you need to succeed.
To find out how Lenkie can support your logistics business, contact us today at hello@lenkie.com or visit www.lenkie.com.
References
https://logistics.org.uk/CMSPages/GetFile.aspx?guid=86764e99-6b36-4517-a93d-f567ebfa0ada&lang=en-GB
The Sector
The logistics sector is one of the main engines of the UK economy, contributing over £180 billion annually and employing more than 2.5 million people. It consists of thousands of small and medium-sized enterprises (SMEs), including hauliers, courier services, and warehousing providers. These businesses play a vital role in our supply chains, from enabling same-day birthday-saving gift deliveries to the movement of critical goods that keep our economy and society functioning.
Despite steady demand for logistics services, SMEs in this sector face significant financial challenges. Rising costs, delayed payments, and an underwhelming response from traditional lenders have created a cash flow crunch that is stifling growth and operational efficiency.
Pandemic induced turbulence
The outbreak of the pandemic in 2020 brought unprecedented demand for logistics services, driven by a surge in online shopping. With high-street retailers closed, e-commerce flourished, creating opportunities for courier services, last-mile delivery providers, and warehousing firms. Many SMEs experienced rapid growth, expanding their fleets, hiring more staff, and scaling up operations to meet soaring demand.
However, this growth came at a cost. SMEs taking on debt to fund expansion made big bets on sustained demand. As restrictions eased and consumer spending shifted back to brick-and-mortar stores, many firms have grappled with oversized operations and mounting financial obligations. The post-pandemic adjustment has been particularly painful for businesses that expanded aggressively during the pandemic.
Rising costs
The logistics industry is heavily exposed to rising costs. Alongside the supply chain disruptions brought on by the global pandemic, global conflict, particularly the outbreak of the Russian invasion of Ukraine, has led to increasing fuel price volatility. At the same time, tighter restrictions on immigration since Brexit have led to increasing wages and soaring vehicle maintenance expenses. With tight competition and pressure to keep prices low, SMEs in the industry often find it difficult to pass these costs on to customers, ultimately compressing margins.
The scourge of late payments
Like most SMEs, small logistics firms frequently operate on extended payment terms, with invoices often paid 60–90 days after goods have been delivered. Smaller companies are more affected by delayed payments than their larger counterparts and are more likely to experience them, given the power dynamics favouring the bigger players in the supply chain. It’s no secret that payment delays are one of the leading causes of SME cash flow issues, which are growing more and more acute as costs grow. Help may be in sight, with the Government vowing to crack down on the ‘scourge of late payments’ and hold larger businesses to account. For now, though, millions of SMEs each quarter find themselves struggling to cover the essential bills to keep staff paid and the lights on.
Capital-Intensive Operations
Logistics businesses require substantial capital to purchase or lease vehicles, maintain fleets, and invest in technology such as route optimisation software. However, many SMEs struggle to access financing for these expenses, particularly if they lack physical assets to offer as collateral.
At the same time, logistics firms are under increasing pressure to reduce their carbon footprints. The UK government’s push for net-zero emissions by 2050 has brought stricter environmental regulations, including introducing clean air zones and incentives to transition to electric vehicles. While these initiatives are critical for long-term sustainability, they represent a significant financial burden for SMEs. The cost of upgrading fleets, retrofitting facilities, and investing in green technology is prohibitive for many smaller firms, especially those already struggling with cash flow.
Limited Access to Finance
Underlining each of these challenges is the fact that traditional lenders are often wary of the industry as a whole. Its relatively informal structure, characterised by short-term contracts and dependence on subcontracted labour or sole traders, increases the perception of heightened credit risk. Banks will often take a blanket approach and exclude smaller businesses as a result, regardless of the underlying fundamentals of the business.
Even when logistics firms can access finance, cash flow-focused products like invoice discounting or short-term loans are rarely tailored to the unique payment cycles of the logistics industry. In both cases, given the inherent seasonal peaks and troughs that characterise the industry, there’s the risk that funds end up sitting on the balance sheet accruing interest whether they are actually used or not.
When cash flow becomes an issue, logistics SMEs are forced to make difficult decisions. They may delay fleet upgrades, limit hiring, or scale back services, all of which can impact their ability to meet demand and compete with larger players. In the worst cases, cash flow challenges can lead to business closures, reducing competition and innovation in the sector.
Flexible Financing Options
Here at Lenkie, we have designed a solution that align with the operational realities of logistics SMEs. Our funding line is tied to specific costs—fuel, payroll, or fleet maintenance—and can provide a greater degree of flexibility, with repayment terms of anywhere between 1 to 12 months. It combines the elements of selective invoice finance, a term loan and a credit card to provide a tailored solution for logistics operators:
On-Demand Funding: Access funds when you need them, whether it’s to cover fuel costs, pay drivers, or invest in your fleet.
Flexible Repayment Terms: Spread repayments over 1–12 months, aligned with your payment cycles.
No Hidden Costs: With no arrangement fees or ongoing fixed costs, you only pay for what you use.
Whether managing rising costs, dealing with delayed payments, or planning for growth, Lenkie provides logistics operators with the financial flexibility you need to succeed.
To find out how Lenkie can support your logistics business, contact us today at hello@lenkie.com or visit www.lenkie.com.
References
https://logistics.org.uk/CMSPages/GetFile.aspx?guid=86764e99-6b36-4517-a93d-f567ebfa0ada&lang=en-GB
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lenkie
London, United Kingdom
hello@lenkie.com
020 4587 0937
Grow Now, Pay Later
Access instant funding to supercharge your growth
lenkie
London, United Kingdom
hello@lenkie.com
020 4587 0937
Grow Now, Pay Later
Access instant funding to supercharge your growth
lenkie
London, United Kingdom
hello@lenkie.com
020 4587 0937