How to Lease Out Freight Containers to Companies
Leasing freight containers is a growing business that is dynamic and complex, especially since the passage of the U.S. Patriot Act. Your business is your containers, because without them you are out of business. So, specialized tracking and management software is a must so you can track and manage your primary asset and profit driver. Start your leasing strategy based on domestic operations, and set milestones (goals) to expand operations internationally. This provides you time to build capital and customers and learn the complexity of international business.
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Things You'll Need
- Legal business structure and name
- Employer Identification Number (EIN)
- Bank accounts
- Business planning software with financial projections
- 2-page executive summary
- Business plan
- Financial projections
- 20-slide power point presentation
- Contracts and agreements
- Container leasing business management software
- Customers
- Website
- Containers
- Capital
- Insurance
Instructions
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Research the type of companies you are going to be leasing to, the cost of used versus new containers, and the costs of different types and sizes of containers in order to put together your container purchase order. If you are leasing to food companies, you will need refrigerated containers. Various businesses have different container requirements.
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Decide on your company name, file your articles of incorporation/organization with the appropriate secretary of state, and obtain your employer identification number (EIN). Use this information to open your corporate bank account. You will need wiring instructions, SWIFT code (international wires), and account numbers in order to process orders.
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Draft your two-page executive summary that outlines the essence of your company. Use this document to draft the business plan and put together your financial projections, as well as design your investor power-point presentation. Unless you are independently wealthy, you will need to raise capital, either from private investors or through your bank or vendors, in order to acquire containers and have sufficient operating capital to exist over the next year.
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Determine your price structure for various sizes and types of freight containers. Have your attorney draft contracts and agreements that limit your liability should something happen and that provide means to get paid. The documents must state both parties to the agreement, the payment amount, payment time frame, destination and method of payment -- wire or certified check.
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Design your website by reviewing similar companies. This strategy reduces the cost and roll-out time and provides a basic template for what layout works best for your company without wasting time. Begin marketing your company to potential customers once your website is launched. Use this as your primary marketing piece.
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Purchase container leasing management and credit analysis software. These are essential in being able to track containers and receivables, manage operations and ensure that customers are creditworthy. These internal controls also indicate to investors, your bank and customers that you are a serious legitimate business. There is additional software that assists in identifying customers.
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Purchase your containers. Perhaps you can structure a deal with the container company on financing containers based on current container orders. Once you have the containers, you need to register the containers in order to track their location. This is a tracking system that consists of a four-letter owner code (indicates the container owner), six-digit serial number and a check digit (identifies mistypes in the container number).
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Obtain investment capital from private investors and/or your bank. Obtaining funding for a start-up business from your bank is unlikely unless you have a strong relationship and assets (real estate, bonds, stocks, cash) to backstop the loan. Speak with suppliers, vendors and investors in the shipping business. Once everything is in place, you need insurance in order to cover containers and any potential liabilities.
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Tips & Warnings
An easier way to start such a complex business is to purchase an existing business. This enhances your ability to raise capital. In some instances, you may be able to factor receivables. You can also use your hard assets (containers) to fund operations in an existing business as well as leverage existing business relationships.
Make certain you have adequate insurance coverage. In addition, it would be beneficial to have a mentor with industry experience if you are a novice. Ensure that your attorney is a corporate law attorney with international experience if you are leasing containers overseas. He will need to be aware of the legalities of shipping relative to the Patriot Act. Failing to do your research on this industry and failing to structure your company properly will likely have negative consequences.
References
- Gaebler Ventures: Starting a Freight & Cargo Containers Business
- Harvard Business School; The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger; Marc Levinson
- Northwestern University; The Secret Life of the Container: Evidence from Texas; Kellie Spurgeon, Jolanda Prozzi, Robert Harrison
Resources
- Photo Credit Thinkstock/Comstock/Getty Images
