Do you own a trucking business? Whether you drive the rig or rent it out to someone who does, trucking loans should be on your radar.
Expand your business line, replace equipment, and buy everything from computers to maintenance and gas. We tell you everything that you will need to know.
What is a Trucking Business Loan?
The first thing to keep in mind is that you might not get a trucking business loan through a bank (although there are some options out there). But there is also the possibility of an SBA loan.
Such a truck loan may be from an online provider. Or it could be a different form of funding, not quite like a standard term loan where, for example, the rig itself could serve as collateral.
Providers tend to be some banks, online lenders, alternative lenders, and issuers of direct truck loans. Your best lender might be a company you have not yet heard of.
Choosing among truck loan providers should involve a comparison of how much is on offer, the time to pay, and whether you are likely to qualify.
Terms vary, depending on the lender, the age of the trucking company, and the borrower’s personal credit.
A trucking business loan is particularly appropriate for significant maintenance or upgrades. During these times of higher inflation, it may also help you save money by borrowing today at today’s prices—and paying later—but with no increase in your costs.
That is, treating a term loan almost like a credit card.
For smaller business expenses (like a fill-up), a business credit card may be better.
How Does a Trucking Loan Work?
Once you determine that you want to buy a truck for your business, you will need to prepare before you apply for the business loan. Like with an application for any other type of loan or funding, you will need to gather together all necessary documents.
It will also, always, pay to compare trucking business loans and providers, to be sure you’re only applying for a loan where it’s more likely to result in approval.
Once you apply, semi-truck financing companies will review your application. They want to determine first, if you qualify for a commercial trucking business loan and also, which rate you are eligible for.
Since the truck itself acts as your collateral, your rate for an equipment loan or commercial trucking business loan may be lower than it would be for other funding, such as a bank loan.
This is because a truck is a valuable collateral and, by securing the loan with it, if you default, then the lender has the right to take your truck and sell it as an asset to cover the balance of your business loan.
This can be risky, but if you are confident that you can pay off the business loan, it could be the right transportation financing to help you grow your commercial trucking business.
Qualification Criteria for Trucking Loans
For many trucking loans, the lender will require a certain amount of time in business. They may also require a minimum annual revenue for your business. There is also, often a minimum personal credit score requirement (so pay off any credit card you have that’s in arrears).
For small businesses where the owner has a poor personal credit score, there are some truck loan outfits that will make an allowance if the owner can bring something else to the table.
Often, that is higher annual revenue. Or, the trucking business may have to pay more in interest or have a shorter payback period.
Another way that an owner with bad credit can still qualify for a trucking loan is to agree to stricter mileage and vehicle restrictions.
In general, the truck itself will serve as the collateral for the commercial truck loan.
But what about startup trucking companies? A startup trucking business entrepreneur may have to agree to more mileage and vehicle restrictions, and pay more in interest, for a shorter payback period. This can be the case even if the owner has good credit.
This is just because they are, to the lender, not yet a proven enterprise. Also, for the most part, you will need to have a CDL (commercial driver’s license), even if you are not quite in business yet—or at least be working with an employee who has one.
If your area requires a business license for your trucking company, then you will need to obtain one and be able to offer proof that you have it. This would be a license above and beyond any commercial truck driver’s license.
There are lenders who will require bank statements or tax returns, or both. You may need to make a down payment. Those tend to be 5% – 25%. A lender may want to know about your experience in the industry, too.
And an SBA loan will come with its own set of requirements.
Things You Need to Know About Trucking Loans
Like other forms of lending and equipment financing, a truck loan can be a very large debt. For a trucking company that is doing well, repayment can be rather straightforward.
But for a trucking business that has poor cash flow, an enormous truck loan can end up being a millstone around the business owner’s neck. This is one reason why lenders want to see bank and cash flow statements.
Because if you cannot make a go of it now, then a lender will be skeptical whether your business will be able to recover and thrive with the addition of a six-figure debt.
Interest rates and payback terms will vary. Therefore, trucking companies should shop around for the best small business loan for their particular circumstances.
Business owners should also check the terms closely. There are often going to be restrictions on mileage and usage, with penalties for going over either.
Startup companies and small business owners with bad credit will have fewer options. And the options they do have will likely have less favorable interest rates and more usage restrictions.
There are purchase loans but there are also overhaul loans. And, there are leases. The best choice for trucking companies will depend on the intended usage of the vehicle.
Leases tend to be easier to get, and can be a superior trucking financing option for startup owners. They are also better for a business with trucks that are less durable, like smaller delivery vehicles.
For a continual supply of new or new-looking vehicles, a lease is a way to go.
A purchase loan is better for a durable vehicle like a long-haul truck. If the owner has good enough credit to qualify for one, they will, of course, own the truck outright at the end of the loan—which won’t happen with leasing.
Best Companies for Trucking Loans
Trucking drivers have some terrific options for funding.
1. CAG Truck Capital
CAG Truck Capital is a well-known player in the trucking business financing space. Their trucking business loans even come with a guaranteed overhaul option.
They will finance both startups and preexisting owner-operators. CAG will finance a truck even if you have bad credit, a bankruptcy, or a tax lien. They also report your payments, helping you to build credit.
CAG can finance engine overhauls (which can run in the tens of thousands) and has relationships with certified repair shops across the country. Hence a trucker who runs out of South Dakota can still get funding and repair work in New Hampshire.
2. National Funding
National Funding offers commercial truck financing and leasing. You can get money for a new or a used semi. You can finance up to $150,000 in equipment loans for your commercial vehicles.
A small business must be at least 6 months in business to qualify. The owner will have to have a personal credit score of 575 or better (similar to qualifying for a merchant cash advance). To qualify, they will need to have an equipment quote from a vendor.
Get small business financing for your trucking business in as little as 24 hours. They also offer a working capital loan, equipment financing, and trucking business loans for bad credit.
3. Wells Fargo Commercial Vehicle Financing
Wells Fargo offers loan and lease options, with terms from 12 to 84 months (seven years). Trucking companies can get fixed or floating rates. Get a term loan or operating lease.
They also offer standard and modified TRAC leases, equipment lines of credit, lease purchase agreements, and dealer retail finance programs.
Wells Fargo also maintains an extensive inventory of semi-trailers for lease to fleet owners across the nation. An owner can choose from their current inventory of used trailers, including composite plate vans, refrigerated trailers, flatbeds, dumps, steps, and low boys.
They also finance and lease vocational equipment like tow trucks. You can likely get an SBA loan through them, too.
4. Commercial Fleet Financing
Commercial Fleet Financing will only do a soft pull credit check. There are options for bad credit. Their typical client has a 640 FICO score or better. If your credit score is less than that, you must provide more information.
You will not have to provide tax returns if you are borrowing less than $150,000. The vehicle is the collateral, and they will not take a collateral interest in other property. Hence, you can finance more than one vehicle, if necessary.
They offer $0 down options. Get funding in 24 hours. For a completed application, you can get credit approval in under 2 hours.
5. Balboa Capital Commercial Truck Financing
Balboa Capital is an online lender that provides funding for the trucking industry.
Application-only for hard collateral up to $500,000. Or prepare an application only for soft collateral up to $350,000. If you are approved, same-day funding is available. During regular business hours, approval decisions only take an hour. Flexible terms are available.
They want you to have at least one year in business, and a personal credit score of 620 or better. You must be hauling in $100,000 or more in annual revenue.
Balboa offers equipment financing for everything from beverage trucks to flatbeds.
When to Use Trucking Loans
Trucking loans are an excellent way to finance the purchase or overhaul of a truck. Your business’s cash flow or business line of credit can be freed up for other business needs, such as payroll. 
If you are buying a new or used truck, and in particular you are purchasing a durable vehicle like a long-haul trailer, then a business loan is likely a better option than a lease.
For a small business with some time under its belt (that is, not a startup venture), a loan can make more sense than a lease because you already know how your business is doing, and how the vehicle you are buying will help you continue to be profitable.
Contrast this with when a lease would be better. Leases are better for startups because they have not yet proven the viability of their trucking companies. If the small business goes bankrupt, the small business owner will not be stuck with a six-figure truck.
A lease is also useful for less durable vehicles like panel trucks. Being able to essentially give the truck back after a few years means not being stuck with expensive repairs. It’s also good if your vehicles are customer-facing and need to look good.
Takeaways
Taking to the open road is easier with a truck loan. And an overhaul loan can keep an aging truck on the road longer. Startup trucking businesses probably do better by starting with leasing.
👉 As you can guess, this is only a handful of business lenders that can help you get the financing you need for a truck loan. If you would like to explore more funding options, schedule a free business financing assessment today!
Whatever you choose, contact us today to explore your options, including how to get business credit cards or a business line of credit, build business credit, and increase your business’s Fundability™ to lenders.
