Trucking Business Loans

Transportation companies face many challenges:

• Labor Shortages: there may be a shortage of 160,000 drivers by 2028.
• 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.

Having access to working capital would solve some of these obstacles, but it’s a matter of finding the right financing solution.

What You Need to Know About Trucking Business Loans

Before you jump into a trucking business loan, weigh both the benefits and drawbacks.

Trucking Business Loans Pros

While there are many types of business funding available, none is as custom-tailored for a trucking business as a trucking business loan is! Here are a few of the benefits to consider.

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 trucking financing a lot easier. The truck or equipment you are purchasing acts as the collateral.

Low Interest Rate

Because the truck is your collateral, you typically can get a lower interest rate than you can with other unsecured working capital 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 sizable. 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 working capital for the purchase of a commercial truck or fleet of trucks, and is available to owner-operators and trucking small 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 within 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 because, in addition to worrying about regulations and compliance, you’ve also got to make smart financial decisions to keep cash flowing and your business operating smoothly.

To start a commercial trucking company, you’ve got to have a truck. To grow your company, you’ll need a fleet. If your customers aren’t putting money down in advance of receiving an order, you’ve got to put up the cash or take out the commercial truck loan to buy the truck and get the job done. Here are companies that can help.

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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 prepare before you apply for the loan. In the next section, we’ll discuss the qualifications you need. Once you apply, truck financing companies 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 qualifying requirement for your credit, and may look at both your personal and business credit scores as well as your credit history. 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, your annual revenue, and/or what your experience is in this industry.

How a Commercial Trucking Loan Can Help Your Business

If your business needs a vehicle, either because you run a trucking company or because you need to drive for your work, business financing geared specifically toward equipment purchases like commercial vehicles can help you reserve cash. This is especially important for startups who may not have much capital on reserve.

And speaking of startups: if you haven’t been in business long, you may not qualify for more traditional types of loans, but because commercial trucking loans use the vehicle as collateral, you may find it easier to qualify for this type of financing.

There are many loan options with commercial trucking loans, as well as leasing options. With either, you pay a low monthly payment, which frees up your cash to spend on other business expenses.

Another way taking out trucking financing can help your business is by building your business credit. Each of your monthly payments should be reported to one or more business credit bureaus, which, over time, will help raise your business credit scores and contribute positively to your credit report. That will help you qualify for additional financing down the road.

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

How to Use a Trucking Business Loan to Start a Business

You can use a trucking business loan to purchase one truck and start a smaller operation, or build a fleet of trucks from the get-go. How you do it will depend on your experience in the industry and how comfortable you feel running a business. The type of loan you can get will depend on your qualifications and credit score, as well as your ability to repay what you borrow after fees.

Types of Loans Available for Trucking Companies

While trucking business loans (or equipment loans) allow you to leverage your asset (the truck), making it easier to qualify for financing if you don’t otherwise qualify, there are other financing options to consider.

Some of the following will have more stringent criteria than others, such as SBA and bank loans, which require you to: 

• Be in business 12+ months
• Have a personal credit score of 650+
• Have revenues of $50,000+

If you have bad credit, not to worry. A few of the loans discussed below may still be an option, though they’ll come at a higher cost.

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 Small Business Administration lending program for your needs (there are several). While you can usually get longer terms on these loans, you also typically need good credit.

The CDC/504 loan is specifically designed for business owners looking to purchase equipment like vehicles (as well as real estate).

Bank Loans

While many traditional lenders like banks offer SBA loans for trucking businesses, others offer their own financial products. Small business loans can offer great rates, but the paperwork can take a while and the requirements can be high, so plan ahead.

Some banks offer commercial vehicle loans, but check those requirements. As an example, Bank of America requires a minimum vehicle value of $10,000, a maximum vehicle age of 5 years, and less than 75,000 miles on the vehicle you want to purchase.

Equipment Financing

A truck qualifies as equipment, so why not look into equipment financing? With equipment financing, your vehicle (or other commercial equipment) acts as your collateral for the loan. Requirements to qualify are typically easier than with bank loans.

Interest rates for equipment financing can vary wildly, so be sure to compare options.

Business Line of Credit

If you plan to buy several trucks over time, a business 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 before approving you for a short-term loan. They come with high interest rates and short payment terms, so be cautious and exhaust other options before choosing this one.

Business Credit Cards

While business credit cards aren’t truck loans per se, they may still come in handy in your trucking business. As you will continually have business expenses but not necessarily money to cover them at the same time, having a business credit card can help you maintain a steady cash flow.

There are business credit cards that offer rewards for purchases in certain categories, which may include purchases at gas stations, so this could be a smart way to earn money back on auto-related purchases for your business.

Freight Factoring

Similar to how invoice factoring works, freight factoring allows you to sell an invoice for a load for immediate cash rather than waiting for your customer to pay for it. The freight factoring company will take a percentage of the invoice value in return.

Best Loan Options for Trucking Businesses

SBA Loan by SmartBiz

With the SBA Loan by SmartBiz, you avoid the lengthy SBA application process — you can get funding in as little as 60 to 90 days. You’ll make monthly payments over 10 years with an APR between 8.27% and 9.57%. Make sure you can qualify before you apply because the requirements are more strict than other options.

Line of Credit by OnDeck

You can get up to $100,000 for your trucking business through OnDeck’s line of credit. It considers more than your personal credit when considering your application, so it could be a great option if your credit is less than stellar. You can get a decision in a few minutes and get funding within 24 hours.

Equipment Financing by LendSpark

If you need a large loan to start a trucking company, LendSpark offers loans for up to $2 million. The funding is also quick — you can get the money in your bank within two weeks. You’ll pay an APR between 6% and 35% with monthly payments and up to 60-month terms, depending on your qualifications.

Business Cash Advance by RapidFinance

Another option for a large loan is through RapidFinance. It offers business cash advance for up to $600,000. You’ll pay a factor rate of 1.20 on average with repayment terms of 12 months. Just make sure you can afford to pay back what you borrow within that time frame. The funding is also quick — you can get cash in your bank within three days.

Are There Grants for Trucking Businesses?

Nav offers a Small Business Grant every quarter — and we welcome trucking companies to apply. First place gets $10,000 to put toward expanding or improving their operations, and second place gets $5,000. The application is simple, and we love to get details about your business story. See how and when to apply here.

Fuel Credit Cards for Trucking Companies & Owner Operators

A fuel credit card can help you save money on one of your biggest expenses — gas. You can earn rewards at gas stations or get discounts on gas prices. One popular option is the Costco Anywhere Visa® Business Card by Citi. This card allows you to earn back with its rewards program: 4% cash back on eligible gas and EV charging purchases for the first $7,000 per year and then 1% thereafter. 3% cash back on restaurants and eligible travel purchases. 2% cash back on all other purchases from Costco and Costco.com. 1% cash back on all other purchases. You also pay $0 for an annual fee. 

How to Get a Trucking Business Loan

Start by deciding which of the funding options we’ve discussed you’re interested in. Leasing a commercial is one option, but realize you won’t have an asset you can sell at the end of the lease.

The application process may be slightly different, depending on the type of loan or lease you choose. You as the borrower will likely be asked questions about your business, including its industry, how long you’ve been in business, and what your revenues are.

You’ll then be asked to state the loan amount you’re interested in, and you may be asked for questions about the specific vehicle you plan to purchase. 

Once your application has been approved, you will be presented with your loan options, including interest rate and repayment terms. If you agree with them, you can sign the document (many banks let you sign digitally). The funds will either be paid directly to you so you can purchase the vehicle, or sent to the vendor you will buy from.

Can You Get a Trucking Business Loan with Bad Credit?

Not all trucking business loans require perfect credit. Many options weigh your business revenue and other financials as well as your credit score when deciding on you as an applicant. Check with the lender before applying to see what their credit score minimums are.

Are Loan Options Different for Owner-Operators?

That depends. The options that are available to you depend on your credit history, your experience in the business, how long you have been operating, and more. On the other hand, owner-operators who are already running a successful business are more likely to be able to get a loan than a trucker who is just starting a business.

Nav’s Verdict: Trucking Business Loan

If you’re ready to take your trucking business to the next level, a truck loan could provide the working capital you need to rocket your trucking company to success. Shop around for the best deal on semi truck financing, and make sure the lending partner doesn’t have parameters about the brand or type of truck you can purchase with the trucking loan.

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