Trucking is one of the nation's high-growth industry sectors. Its members transport everything from basic food items to sophisticated electronics on an ongoing basis across the country. However, great trucking companies rarely spring up overnight. Drivers need training, experience, and a clean driving record to become owner operators of their own independent trucking companies. They'll also need cash. Whether you want to be an over the road driver of a semi-truck or own a fleet of refrigerated commercial trucks, you'll likely need some form of truck and equipment financing. Here's a quick guide to getting the financing that you want for the equipment that you need.
One of the most common ways to fund truck and equipment purchases is with a commercial loan through a traditional bank. Getting a bank loan allows you to choose from a variety of new and used trucks that are for sale at various dealerships. However, the commercial loan process is complex. Banks require a lot of documentation prior to issuing a loan, and they're more likely than other financial institutions to deny a loan application.
Specialized online lenders are alternatives when it comes to purchasing a semi-truck, trailer, or trucking equipment. These lenders have similar eligibility requirements as banks, but they process truck loans faster than banks.
All lending institutions make their money by charging interest on the principal payment amount of the loans that they service. Specialized online lenders tend to charge higher interest rates than traditional banks.
Before you ever thought about signing up for a commercial loan, you likely took more than a casual glance at the rig of your dreams at a local dealership. Don't overlook the dealership when shopping for commercial truck and equipment financing. Dealerships offer loans to purchase the equipment and trucks that they sell. When you do a direct commercial loan application with a dealership, you can expect easier loan processing, more personalized financing options, and higher down payments than what other lenders require.
If you've decided to get truck or equipment financing from a bank or other lending institution and not directly from a dealership, you'll need to carefully shop for your vehicle or equipment before gaining loan approval. Banks and online lenders want to know if the vehicle or equipment that you plan to buy is worth the investment.
The bank or specialized online lender keeps the title to your truck or equipment until you make the last loan payment. If you default on the loan, the truck or piece of equipment belongs to the lender. Lenders want to make sure that if a default happens, they are going to get something of value.
You'll need to provide the lender with a truck or equipment condition report. This report contains information about the truck's mileage and age. It also has the vehicle's make, model, and serial number. Armed with this information, lenders can delve deep into the maintenance and accident history of the vehicle. Your lender will also require pictures of the truck. You'll present these documents to your lender along with a signed price quote from the dealership.
If you've ever put together a business plan for your trucking company, you know how important insurance is to your operations. Sadly, trucking accidents are all too common, and owner operators and large truck companies get a variety of insurance products to cover their drivers, fleet, and cargo. When you apply for a truck or equipment loan, you'll need to have an insurance policy in place before you receive a penny of loan money.
Lenders consider the type of trucking services that you offer when they determine the types of insurance products that you need for your loan. If you plan to finance heavy hauler trucks that are used to transport modular homes across state lines, you'll need insurance products that are more complex and expensive than those that are required for refrigerated grocery trucks. Be ready to have proof of the proper types of insurance for your people, vehicles, and cargo before closing the deal with your loan officer.
After doing some preliminary research about the truck or equipment that you want to finance and the associated insurance products, you're ready to decide on a lender. Ultimately, your choice will depend on the lender's eligibility requirements.
Since the trucking industry is known for its deadly highway accidents, banks and other lending institutions want to see that the person who will be driving the financed truck is an experienced trucker. Proving that you've had your commercial driver's license for at least 5 years goes a long way towards getting your loan approved.
While you can expect dealerships to charge a substantial down payment if you get financing directly from them, other lenders also charge down payments. The standard amount that you can expect to bring to the loan table is between 10% and 50% of the truck's price.
Your credit score is one of the most important eligibility requirements when it comes to truck and equipment financing. Most lenders won't even process your application if you don't have a credit score of at least 600. However, bad credit is not a total deal breaker. There are a number of lease-to-own truck programs that allow you to make fixed monthly payments and take possession of the truck's title at the end of the finance period. The best part of all is that many companies that offer these programs don't require credit checks.
After comparing the eligibility requirements of different lenders, you're ready to submit a loan application to the one that promises the best terms for your business. While each organization is different, they all generally require the same types of documentation to process truck and equipment loans. You can expect to send your loan officer copies of your bank statements, tax returns, and profit and loss statements. You also need to show proof that your business is licensed and registered and that you have a valid U.S. Department of Transportation number.
No two trucking companies are alike. Some moving companies serve consumers by hauling household goods via box trucks across state lines. Dump truck operators cater to general contracting companies by transporting construction waste away from work sites. Your vision for your company isn't cookie-cutter, so it makes sense not to take a one-size-fits-all approach to equipment financing. Begin your journey by choosing to work with a financial institution that has deep knowledge of your sector.