Loan Amounts
$5,000 – $5 million
Interest rates
2% – 20% APR (Annual Percentage Rate)
Repayment Terms
12 – 72 months
Turnaround Time
As fast as 2 business days
Transportation companies face many challenges…
- Labor Shortages – Trucking needs nearly 200,000 new drivers in the next 10 years.
- Regulations – Fuel economy, hourly limits, and logging devices can add up.
- Compliance – Safe parking is scarce and accidents are on the rise.
- Cash Flow – It can take up to 90 days to get paid.
- The Cost of a Commercial Truck – One truck can cost hundreds of thousands of dollars. A fleet costs even more.
What You Need to Know About Trucking Business Loans
Before you jump into a trucking business loan, weigh both the benefits and drawbacks.
Pros
- No cash collateral required
- Low interest rate
- Payment period can be long
Cons
- Truck can be seized if you are unable to pay
- Requires a down payment
- Truck depreciates quickly
Trucking Business Loans Pros
While there are many types of financing for small businesses, none is as custom-tailored for a trucking business as a trucking business loan is!
No Cash Collateral Required
Most small businesses don’t have money laying around to fully purchase a commercial vehicle, so the fact that no cash collateral is required makes financing a truck a lot easier.
Low Interest Rate
Because the truck is your collateral, you typically can get a lower APR than you can with other loans. This can help you save on the loan in the long run.
Payment Period Can Be Long
If you’re buying an entire fleet, your loan will be sizeable. The more time you have to pay it off, the less strain that monthly loan payment will put on your profits.
Trucking Business Loans Cons
Every type of financing has drawbacks. Here’s what you should be aware of.
Truck Can Be Seized
Of course, you hope you are able to pay off your equipment loan, but should the unexpected happen, missing a few payments could cost you the truck. Your lender has the right to seize it to cover the outstanding balance, which can put your business in jeopardy.
Requires a Down Payment
While there’s no cash collateral that you need to provide, you will need to make a down payment, usually 5-25%, depending on your credit.
Truck Depreciates Quickly
Like any type of machine, a commercial truck will depreciate in value rapidly. By the time the loan is paid off, you can sell it, but only for a fraction of what you paid.
What is a Trucking Business Loan?
A trucking business loan provides capital for the purchase of a commercial truck or fleet of trucks, and is available to owner-operators and trucking business owners with a team of drivers.
Unlike with other types of secured loans, you aren’t required to put cash down as collateral on the loan because the truck you are purchasing is that collateral.
Trucking Business Loan Companies
There are more moving parts than ever behind the transportation industry, and it’s likely to get only more complex over time. There’s a huge difference between driving for a business and owning one.
To simply start a trucking company, you’ve got to have a truck. To grow your company, you’ll need more. If your customers aren’t putting a ton of money down ahead of time, you’ve got to put up the cash or take out the loan to buy the truck and get the job done. Here are companies that can help.
Advertiser Disclosure
Equipment Lease by TimePayment
Equipment Financing by LendSpark
How Does a Trucking Business Loan Work?
Once you determine that it’s time to buy a truck for your business, you’ll need to get prepared before you apply for the loan. In the next section, we’ll discuss the qualifications you need. Once you apply, lenders will review your application to determine first, if you qualify for a trucking business loan and second, what rate you are eligible for.
Because the truck itself is your collateral, your rate for an equipment loan or trucking business loan may be lower than it would be for, as an example, a bank loan. The reason for this is: should you be unable to pay your loan off, the lender has the right to take your truck and sell it as an asset to cover the balance of your loan. It’s risky, but if you are confident that you can pay off the loan, this could be the financing that helps you grow your trucking business.
How to Qualify for a Trucking Business Loan
There are several factors that go into how you qualify for the loan. Each lender has a different requirement for your credit and may look at both your personal and business credit scores. The higher your scores, the better rates you may qualify for.
You may also be required to make a down payment, typically 5-25% depending on your other qualifications. Lenders may also look at how long you’ve been in business or what your experience is in this industry.
Best Uses for a Trucking Business Loan
There are several situations where you can benefit from having a trucking business loan.
- You’re transitioning from being a driver for someone else to an owner-operator
- You are expanding your fleet of commercial trucks
- You have an emergency that requires you to replace a vehicle
Alternatives to Trucking Business Loans
While trucking business loans (or equipment loans) allow you to leverage your asset (the truck), there are other financing options to consider, especially if you don’t meet these general criteria:
- Be in business 12+ months
- Have a personal credit score of 650+
- Have revenues of $50,000+
SBA Loans
With some of the best rates around for business loans, SBA loans are offered through banks who will work with you to choose the best SBA lending tool for your needs (there are several). While you can usually get longer terms on these loans, you also typically need good credit.
Bank Loans
While many banks offer SBA loans for trucking businesses, others offer their own financial products. Bank loans can offer great rates, but the paperwork can take a while, so plan ahead.
Line of Credit
If you plan to buy several trucks over time, a line of credit might be a good fit. It allows you to take out the amount you need when you need it, up to a capped amount.
Merchant Cash Advance
One of the more expensive types of credit, the merchant cash advance appeals to businesses that don’t have great credit. Rather than using your credit scores to decide whether to loan to you, these companies look instead at your revenues. They come with high interest rates and short payment terms, so be cautious.
Nav’s Verdict: Trucking Business Loan
If you’re ready to take your trucking business to the next level, a trucking business loan could be the fuel to rocket you to success. Shop around for the best deal, and make sure the lender doesn’t have parameters about the brand or type of truck you can purchase with the loan.