If you’re a long-haul trucker or love the open road, starting a trucking company might seem like the right thing to do. The trucking industry is booming, and in fact, there’s never been higher demand than now for people to enter the industry. However, just wanting to start a trucking company isn’t enough. Below are some options for commercial lending for truck companies that you may want to look into (if you need the loan that is – if you don’t, good for you!).
How does commercial truck financing work?
Commercial truck financing works about the same as a car loan.
You’ll use the truck that you finance as collateral for the loan. This helps reduce the risk for the lender and helps you get a truck.
They will also hold the title of your truck until you pay off your debt. If you default on payments, they could repossess the vehicle.
If you’re just starting to think about trucking, you might be wondering…”Can I get a loan to start a trucking business?”
Yes, you can…although you may have to do some prep work beforehand.
Many traditional lenders (like your local bank) can offer SBA loans for your new trucking business. But, if you don’t qualify for an SBA loan, you can also get another small business loan or even a personal loan (although I don’t personally recommend it).
Just remember, no matter which avenue you take, there will be paperwork to fill out and sign. It’s best to be prepared before you even apply.
You can find out what a lender would want and expect by giving them a call or checking out their website.
Can a trucker get an SBA loan?
Truckers can get a special 7(a) loan if they qualify for it, but there are other options as well.
Of course, you’ll need to be able to prove that you’re indeed a business (or starting one!) to qualify. So getting an LLC or paperwork that states your intent can be helpful when applying.
Is it hard to finance a semi-truck?
To easily qualify for a semi-truck loan, you’ll need…
- a great driving record,
- established revenue (even if it’s from a day job),
- and a decent credit score (of about 650 or higher).
If your credit score is lower than 650, the lender may require a cosigner on your loan.
What is the interest rate on a commercial truck loan?
The interest rate on a commercial truck loan will depend on what we discussed above.
If you have a good credit score, money to put down, a decent income, and driving experience, you could pay as low as 5% interest in most cases. The less you have to offer, the higher your interest rate.
At most, you may be looking at around 29.99%.
What is the average semi-truck payment?
The average semi-truck payment will depend on what you buy and your interest rate with your lender. But, let’s say you finance a $75,000 truck for the lowest rate of 5% for the next 60 months (or 5 years). That’s about $1,415 a month, not counting insurance, gas, or maintenance and repairs.
Of course, you may be able to get a longer loan or cheaper truck, but $1,415 a month is about the average.
Every business will cost money. However, you can get started with a loan. That way you can pay a fixed amount each month.
We list some easier and cheaper ways (upfront) to get started below!
Is it worth buying your own semi-truck?
It absolutely can be worth buying your own semi-truck!
Not only will you be able to take the jobs you want and leave those you don’t, but you’ll also earn more per delivery.
As an example, as a trucker with a company, you’re usually paid per mile that you drive. But, because you’re an employee, they charge a higher rate and pay you a percentage of what they charge. As the owner, you get to take it all home.
Also, if you lease a truck, you’d have to abide by leasing terms. That may not work for long-haul truckers or those who drive a lot throughout the week. By buying, you can ensure that you can do whatever you need to do to make your business thrive.
How To Finance A Trucking Business
Now that you know how financing a trucking business works, let’s talk about how to actually do it!
Find Your Niche First
All hauls are not the same. Some require extensive planning while others are less detailed and can be done at the drop of a hat. For a small startup company, you need to think about your passions. Doing something you enjoy, even with limited capital, doesn’t seem like work.
Many trucking companies specialize in one particular product, like food or florals. Choosing the right niche for your company should be an equal balance of financial backing and what you want to surround yourself with. You also need to think about the future.
Even the smallest companies want to expand. So, if you want to hire other drivers, you’ll need to think about their safety on the road as well. You also need to consider the financial obligation that comes with it.
Even if you only hire one or two people, you should install dash cams in their trucks. While it’s an added expense, responsible drivers won’t find them intrusive and will welcome that extra layer of security. Dashcams offer real-time monitoring of your drivers’ actions while behind the wheel.
If you’re looking for the best dash cameras available, it’s always good to do your research. You can review a guide on fleet safety and also how to choose the best dashcams for your fleet. They’ll break down the different types of cams and the benefits they offer.
While you may not be able to buy everything out of pocket to start your trucking business, you should still be smart about any loans you take out. Try to get the best deal and interest rate that you can, and a decent repayment plan. And, if you can buy extra items in cash, do so.
Don’t get yourself into massive amounts of debt to start a business, because it may take months (or years) to turn a profit. It’s better to start small and build up when you have the money, than to borrow thousands that you can’t pay back.
If your business requires specialized equipment, you might be able to rent it. Just like when you had to save for your first car, you could save for a down payment and then lease.
Additionally, some major equipment companies offer rental-to-own packages. If not, most offer competitive financing options.
Try A Franchise
In some scenarios, you can enter into a franchise agreement with specific vendors. Then, you operate under your own name while paying the other party a franchise fee. This is a great option if you don’t have much money to put into a trucking company but want to get started right away.
Just be sure to READ any paperwork you sign, so you know you’re not being shorted!
Traditional bank loans are also an option. However, most banks do require excellent credit, a comprehensive business plan, and a positive balance sheet. If you’re just starting out, you might need a co-signer to be approved.
You’ll probably need to demonstrate fixed assets as well. Since your fleet is considered rolling stock, the bank will want to see that you have something as collateral. This is a good option if you meet the requirements, and can keep a job (or have a co-signer with a stable job) that you can use to meet those requirements.
You can also apply for a small business loan through the Small Business Administration too. The SBA will require an unconditional 20 percent guarantee of actual ownership to consider you for a loan. This means that they will own 20% of your business until you pay off your loan.
It’s important to note that while the SBA has strict lending standards, they do offer flexible loan terms and lower rates than conventional bank loans.
Commercial Lending For Truck Companies: It’s Easier Than You Think!
As you can see, there are many options for commercial lending for truck companies. You just have to find the best option for you!
I suggest getting your paperwork and business plan together and then seeing what you could possibly qualify for.
Are you thinking about starting your own trucking company? If you are, tell us about it in the comment below!
AUTHOR Kimberly Studdard
Kim Studdard is a project manager for online entrepreneurs and small businesses. When she isn't spending time with her daughter and husband, or reading her growing pile of horror books, you'll find her working on her HR degree and working towards FIRE.