The trucking business is nothing if not unpredictable. The cost of repairing trucks, hiring a workforce, and dealing with myriad seasonal labor challenges add up to a lot of expenses and even more difficulty with the bank. But gaining quick access to capital doesn’t need to cause headaches.
The trucking business is booming, and that growth has attracted the attention of funders. Although the bigger lenders may avoid companies who don’t command reliable profit margins, it doesn’t mean that getting a business loan for a new truck is hard. All that’s left to decide is what you need and how to do it.
In this article, we’ll discuss the ins and outs involved in securing funds for a new truck. There are several options available, all with their requirements—so let’s get into the details!
What’s Required For Approval For Business Funding For a Truck?
First off, it’s important to know that several types of business loans are available for truck drivers. Each requires different time commitments, repayment plans, and so forth. The types of loan are:
- Short-term loans
- Lines of Credit
- Business Credit Cards
- Equipment Financing
- SBA Loans
Short-term loans are very expensive forms of credit. It’s not a good idea to apply for a commercial business loan for a trucking company unless you have an emergency. On the other hand, most trucking businesses with lower than average FICO scores can secure them in as little as 24 hours for truck business funding.
Lines of credit are similar to credit cards. The lender sets the limit and the borrower pays interest on the amount which they withdraw. LOC (lines of credit) can be used to cover any expense, like short-term loans.
We recommend equipment financing as the best loans for transportation businesses. These loans for truck drivers are made specifically for these kinds of purchases. You can either take out an equipment loan or lease equipment, and you’ll often get low-interest rates and long-term refinancing options.
For the best bank for trucking companies like Wells Fargo and Commercial Fleet Financing, you’ll need a credit score north of 640+ and provide proof of three-year experience. Others have no minimum FICO. Usually, you’ll need to give proof of monthly sales gross of $15,000 or more.
SBA (Small Business Administration) loans are government-backed, and they’re most commonly used by businesses that don’t qualify for traditional business loans. They’re generally more flexible with repayments than other loans. We’ll talk more about them below. However you may have issues obtaining an SBA Loan within the trucking industry.
With all these loans, you’ll need to submit a credit score. SBA loans aren’t great for trucking business loans with bad credit, but it’s still a good idea to apply anyway. Equipment financing is not as hard to find if your score isn’t ideal.
With equipment financing (which we recommend for buying a new truck), there are a few requirements to keep in mind. If your company brings in over $120,000 per year, lenders may waive any credit score minimums.
Ensure you get the lowest rate with equipment financing, give proof of adequate insurance, eliminate excess budgetary expenses, and apply for the loan when revenue is rising. You’ll may need to cover 5% or more of the cost for a down payment.
The Steps To Get Funding For Your New Truck
With the lending options out of the way, the next thing to do is start applying. Here are the steps to secure truck business funding.
- Make sure you’re eligible. Check your credit score (it should be above 600), CDL license (3-5 years minimum), the age of the truck you want to loan if it’s not new (less than 10 years), and the mileage (under 700k)
- Get your documents together. Every financing company is different, but you’ll likely need the minimum: proof of registered business, tax statements, returns, profit and losses, your CDL, business licenses, USDOT number, motor carrier number.
- Select a truck. Note the make, model, year, serial no. Take 3+ pictures.
- Put insurance together. You can get preapproval without insurance, but you’ll need proof before the lender releases the loan.
- Submit the documents to the lender.
The Benefits of Alternative Financing? Speed!
Without a doubt, the best part of applying for alternative financing for your new truck is the speed with which you’ll get funding. Many lenders (especially for equipment financing) can get you your funds in two to five days. The best lending companies operate online where they can receive your application with no minimum FICO and send you a response in a day.
By applying online, alternative financing gives you more control over which lenders you’re willing to apply with. It’s a zero-pressure way to collect your documents on your own time and submit them when you’ve found your ideal lender.
Is SBA Funding Available For Trucking Companies?
Yes, there certainly is! SBA financing is low-interest 2-5 year loans (though some are 30 years). Generally speaking, it takes around 45 days for an SBA loan to process, but they carry higher maximum amounts and simple applications. There are also small business grants for trucking.
In addition to the conventional SBA loans handed out by the government, you may apply for an SBA disaster loan for a trucking company. These are set aside to cover operating expenses caused by natural disasters such as COVID-19. Economic injury disaster loans (EIDLs) can help recoup losses brought about by the pandemic.
You have a lot of options when seeking out suitable commercial business loans for a trucking company. There are a lot of potential options to find funding for the trucking business. Short-term loans and lines of credit are fast ways to get capital, but equipment financing and SBA loans are often the safer long-term choice.
Either way, it’s easier now to secure quick funding for trucking companies than it’s ever been.
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.