Do you know how to secure a loan for a trucking company? Here is what you need to know.
Trucking is highly capital intensive. This can be quite challenging for most new entrants, but enough of the gloomy picture already.
There is available financing for anyone interested. You only need to meet the requirements. The conditions attached to accessing such loans aren’t impossible either.
Here, we’ll show you just what is needed to qualify for a trucking loan.
Growth And Expenses
Growth always comes with demands for expansion. Existing trucking businesses have to purchase additional fleets of trucks and add to their workforce. It is immaterial if you are an owner-operator or operate on a much bigger scale than that.
The same process applies to all. For a trucking business to expand, expenses must result.
Types Of Loans for a Trucking Company
Before proceeding to apply for a trucking loan, you must identify the different types available. These consist of several and each fits specific needs. For instance, there are low-interest loans offered by the Small Business Administration (SBA). Others include medium-term installment loans, business lines of credit and equipment loans.
Other types include business credit cards and short-term business loans. So, which should you apply for? We will be discussing each of these shortly, By reading through, you should be able to figure out what serves your trucking business best.
SBA Trucking Loans
This is a government-backed loan available for both small and large trucking companies. The SBA is great for trucking companies seeking to purchase new trucks, expand to newer routes or hire new drivers or truckers. The SBA provides this loan in partnership with financial institutions.
i. Who Qualifies?
Before we go any further, we must state that there are a borrower eligibility criteria you must qualify for. This includes a bankrupt-free credit report. Past government loan defaults will disqualify you. What more? You must have a high credit score. This shouldn’t be below 680.
As a borrower, you should be able to provide proof of legitimacy for taking this loan.
ii. SBA Micro Loans
This is a type of SBA loan which is ideal for smaller trucking companies. You should opt for this category of SBA loan if you’re an owner-operator. The SBA loans an average loan of $13,000 to trucking businesses. However, this goes as much as $50,000. Such loans are meant to cover equipment purchases, supplies, and working capital.
iii. SBA 7(a) Loan
Under this type of loan arrangement, you stand to receive as much as $5 million. This covers areas of expansion such as real estate, equipment purchase, and acquisition of smaller trucking businesses. Interest rates for SBA 7(a) loans range between 7% to 10%. This is either variable or fixed with a repayment term of 10 years. This can go higher in the event of a real estate purchase.
To apply for the SBA 7(a) trucking loan, you’ll need to approach SBA’s intermediary lenders such as private lenders, credit unions and banks. Use its lender match tool to get paired to the right lender within your location.
Medium Term Installment Loans
This is another type of trucking business loan you can get. So, is this best for you? It is if you need funding for working capital, existing debt refinancing or equipment purchase. This type of loan has a repayment term ranging from 1 to 5 years.
Medium-term installment loans can be used for the expansion of your trucking business in addition to acquisitions.
As a borrower having a higher credit score, you can get this loan at interest rates of 6%. A 30% interest rate applies to borrowers with lower credit scores. Applying for the medium-term installment loans can be done through alternative lenders or banks and credit unions.
Business Lines Of Credit
Does your trucking business need capital on demand? If it does, the business lines of credit loans may be your ideal loan type. This, in a way, is similar to a credit card in that it has a credit limit. You can withdraw multiple times for equipment purchase, operational expenses as well as for other types of operational emergencies.
Interest and fees are paid on the borrowed sum. The exact amount of such fees and interests are determined by the lender. However, it falls within the range of as low as 1% to as high as 30%. Borrowers with a better credit rating receive better rates.
The period for repayment varies from about 6 months to a year. When loan repayment is delayed, the overall cost of your loan gets higher. Getting the business lines of credit loans for your trucking business requires credit scores within the 600 marks.
How do you get it? This can be sourced from some financial institutions especially when your credit score is high. However, this doesn’t entirely exclude those with a low credit score. For borrowers in this category, lines of credit are available.
If you need to purchase expensive equipment like a truck(s), then equipment loans might be the right choice for you. The lender you choose will determine the rates and loan terms. Other determining factors also apply. These include the loan amount and your creditworthiness. Interest rates drop significantly for buyers having excellent creditworthiness.
The reverse is true for those with low credit scores. We recommend you put some down payment to drop your debt. It doesn’t matter if you qualify for 100% financing. To obtain equipment loans, approach credit unions and banks. It may interest you to also know that equipment manufacturers also provide this service.
Knowing how to get loans for a trucking business begins with getting the right information. This article contains such information and helps you actualize your expansion plans. These are only a few methods to obtain business loans. However, all of the above-mentioned loan types are quite effective in generating the needed financing.
These trucking loans are available for all types of business needs. Start your journey today to grow your trucking business with greater ease.