In the trucking industry, you won’t get far without a fleet of vehicles for your business. Owner operators and small business owners often don’t have the working capital to cover their trucking expenses, but they need those vehicles for their truck drivers. The solution? Semi truck financing.
Access to funds that allow you to buy the vehicles you need can help you conserve cash flow while still getting the equipment you need to succeed.
How To Get Commercial Truck Financing
As you’ll see later in this article, you have several options when it comes to where to find commercial truck loans. Explore each finance option and determine which gives you the best rate.
You also have the option of leasing vehicles or a fleet. Commercial truck leasing may provide a more affordable monthly payment and give you the ability to return the vehicles at the end of the lease rather than have trucks that have depreciated in value.
You should also consider TRAC leases, or terminal rental clause agreement leases. These provide more flexibility in your monthly payment and residual (what you owe at the end of the lease), which can be helpful in managing cash flow.
How Commercial/Semi Truck Financing Works for You
If you decide that truck or trailer financing is the best option, here’s more on how it works.
You can finance the vehicles you are purchasing through the car dealer you are buying from, but it can pay to shop around, and there are many banks and other lenders that specialize in loans specifically for heavy machinery and vehicles.
With truck or equipment financing, the vehicle or equipment you are purchasing serves as your collateral against the loan. Should you run short of money for a few months and be unable to continue paying your loan, truck lenders have the right to seize that collateral to cover what you owe. The good thing about this is that you don’t have to find other assets to serve as your collateral.
Your application will be reviewed and lenders will look at your qualifications (more on those in a bit) to determine what finance options they can offer you. They will present you with the interest rate you will pay on your loan, and if you agree to the financing terms, you’ll sign on the dotted line then start making monthly payments on your purchase.
You may be required to make a down payment as part of the application process, so plan for that.
What Credit Score Do You Need to Buy a Semi Truck?
So here’s the big question, because the better your credit scores, the better the finance rates you’ll be eligible for.
To qualify for the very best terms for a truck purchase, you should have good personal credit score of 660 or higher.
That’s not to say if you have bad credit you can’t qualify for commercial vehicle financing. We’ll discuss your options for this scenario in the next section.
Will Bad Credit Prevent Me From Getting Semi Truck Financing?
Even with bad credit or tax liens on your credit report, there are online lenders who are willing to extend credit to you. Just know that, with these types of loans, you will likely pay higher interest rates than you would with traditional truck or equipment loans.
Consider title loans as an option. Your vehicles are put up as collateral and you sign the title over to the finance company so that, if you can’t pay the loan, the lender takes the truck. These do have high fees, but if financing semi trucks is a priority, this may be a way to get them.
What You Need to Get Semi Truck Financing
While lender requirements vary, there are a few general qualifications you will need to get money for your semi truck purchase:
- Information on the truck(s) you plan to purchase
- Working with a reputable vendor
- Good credit scores
- Time in business
- No negative marks on your credit report
- Down payment
- Truck insurance
Information on the Truck(s) You Plan to Purchase
Some lenders will have requirements about the type of vehicle, as well as its condition, that they are willing to provide money for you to purchase. Some will finance used trucks, while others won’t. Be prepared to provide the year, make, and model, as well as condition and mileage information.
Working with a Reputable Vendor
Most lenders will only extend credit to you if you buy your trucks from a dealer rather than a private party. And working with a professional dealer may open up other finance opportunities to you.
Good Credit Scores
We’ve already discussed the importance of good credit scores in helping you get the best rates. Both your personal and business credit scores matter, so access your business credit report before applying for a loan. Nav provides you with free business credit scores, too.
Time in Business
A commercial fleet financing company may want evidence that you have been in business for a minimum of two years, possibly longer. If you’re starting your big rig business, you may not find as many finance opportunities through traditional channels.
No Negative Marks on Your Credit Report
Another reason to review your credit report before applying is to make sure there are no tax liens, repossessions, or delinquencies on your business credit report. These are derogative marks that might make it difficult to get a good interest rate.
In addition to needing to provide a down payment on your loan, lenders might want proof that you have working capital reserves to cover your loan payment, insurance, and repair costs.
Because the vehicles you buy are also your collateral, your lender may want proof that you have insured them before you drive them off the lot. That way, should anything happen to the vehicle, their collateral isn’t damaged and therefore devalued.
Commercial Truck Financing Rates and Terms
While the only way to know what rate you would get on a truck loan is to apply for one, you can generally expect, if you have good credit and a solid credit report, an interest rate of 5-6%.
If you have poor credit, you may need to make a larger down payment and then might see a rate anywhere from 7 to 30%.
For a vehicle lease, you don’t pay an interest rate but rather a flat fee, and that can vary from $300 a month for a smaller truck to $1,000 a month for a semi truck. This may be lower than what you’d pay for a financed truck, and it helps you keep cash flow steady.
The Best Semi Truck Loans
Below are a few lenders that we recommend you start your research with when seeking a semi truck loan.
Wells Fargo Transportation Financing
Wells Fargo offers both loan and lending options for commercial vehicles, with competitive fixed or floating interest rates and terms from 12 to 84 months. You can finance both new and used equipment.
Bank of America Equipment Financing Loans
Bank of America offers equipment loans (which includes heavy trucks and trailers), leases, and lines of credit from $25,000, with rates as low as 3%.
PNC Bank Transportation Finance
PNC provides several financing options, including leases and loans, for a variety of types of trucks and equipment.
Final Word: Commercial Truck Financing
Commercial truck loans help owner operators and trucking companies conserve money while building credit. Whether you need a fleet of trucks, a single vehicle, or a tractor trailer, explore your finance options to get the best rate.