If you are an owner of a trucking company, knowing where to find funding might be difficult. As a new business start-up or a company struggling to make it through the economic impacts of COVID-19, we know that securing financing is an absolute necessity for a transportation business.
Below we will discuss the best loans for transportation businesses and alternative financing options available to trucking companies. Whether you are struggling this year or are just getting started as a company and need funding, there are different costs and requirements to consider when deciding on your funding options. We will go over the most popular types of financing for trucking companies in 2021 and what they entail.
Funding Your Fleet in 2021
As a trucking company, you have many different loan and financing options to choose from in 2021. Here are some of the most popular types of commercial business loans for trucking companies and what they require.
Bank Loans for Trucking Companies
Bank loans for trucking companies often come with the best rates out of all commercial loans because they are competitive. They provide loans with different term lengths, lines of credit, asset-backed loans, and more. Research to find the lowest rates and the best bank for trucking companies.
Borrowing from a bank often has tighter requirements than other lenders and makes it harder for you to get a loan. These include good personal credit, good business credit, steady cash flow, business collateral, steady income, and more.
- Rates are typically between 5% and 15%
- Funding varies from $50,000 to $5,000,000
- Collateral is required to obtain a loan
- The terms vary, ranging between 1 and 30 years
- The fees are considered medium costs
Lines of Credit for Trucking Companies
If you are looking for funding for a trucking business, you can take a line of credit from a bank to pay for your expenses. They allow you to access funds when you need them without taking out a new loan each time. You can take out a secured or unsecured line of credit with a trucking business.
Secured lines of credit are backed with collateral from your company, such as machinery, real estate, or accounts receivable. An unsecured line of credit comes as a credit card and requires you have good credit.
Small Business Grants for Truck Drivers
If you are looking to obtain trucking business loans, bad credit can often get you into trouble. An alternative option to loans is grants. Grants are significant for small business starters because they are money you do not have to pay back. There are a variety of grants that truck drivers wanting to start their own business can obtain.
The US Federal Government has a variety of different small business grants for trucking available. You can research Grants.gov to see and apply for open grants. The SBA also has a grant search feature on its website. To obtain a grant, you have to apply and get accepted, and it may or may not matter how your personal or business credit is.
SBA Loans for Trucking Companies
An SBA loan for trucking companies is provided to small businesses and backed by the US Small Business Administration. They provide financial help to businesses that have not secured traditional financing from a bank. These are some of the best loans for truck drivers.
An SBA loan allows trucking businesses to get financing when they can't get it from a bank. These loans aim to encourage typical bank lending by agreeing with the bank to pay back most of the loss if the borrower is unable to pay back the loan. You must meet specific requirements before acquiring an SBA loan and certain things you can do to prepare for an SBA loan.
- Rates are typically between 5% and 8%
- Funding varies from $50,000 to $500,000
- Collateral may be required to obtain a loan
- The terms vary, ranging between three and 25 years
- The fees are considered medium costs
How Truck Drivers Are Taking Advantage of Alternative Financing
There are several different financing options for trucking companies. These include bank loans, SBA loans, lines of credit, equipment financing, asset-based loans, and more. There are alternative funding options for trucking companies that don't meet traditional bank and SBA loan guidelines.
Truck drivers can take out what is called a mid-prime alternative loan. They will not have as low of rates as the other loan options, but they are often lower than many of the online business loan options. They provide long-term loans and are often able to get you your funds much faster than typical banks.
Another option for alternative financing is Equipment financing for trucks. With these, you finance your equipment and repay the interest over a fixed amount of time. The equipment is the collateral for the loan, and when you have paid it off, the equipment is yours.
If you have bad credit, lack business documentation, or need financing immediately, you can also consider taking out a trucking cash advance. These are not loans, but rather it is a business-to-business selling of the revenue your trucking company will be making in the future. You essentially sell your future income and access the capital you typically would have to wait to receive.
If you are struggling to keep your trucking business funded or plan to start your own transportation business, there are many funding options available to you. You will want to get the loan or credit with the lowest rates and most extended terms to save you the most money in the long run.
If you're looking to learn more about business loans for trucking, complete a 1-minute application to speak with one of ROK Financial's Business Financing Advisors today.
About the Author, Madison Taylor
Madison Taylor is the Brand Ambassador at ROK Financial. She is responsible for raising brand awareness and business relationships with business owners across the country. Madison loves that she plays a small role in getting Business Back To Business Through Simple Business Financing and looks forward to hearing what you think about the blogs she creates! Madison has been working in the financial space for six years, and loves it! When she is not at work, you will find her at home learning a new recipe to test out on her family or going on new adventures with her friends.