There is no question that leasing commercial vehicles can be a viable option for some businesses. However, if you want to own your vehicles outright at the end of an agreement but don’t have the funds to pay cash, you will need a commercial fleet loan.
Alternatively referred to as a commercial truck loan or a commercial loan, these financial products may be just what you need to jumpstart your business growth. Whether you are looking to expand current operations, replace aging equipment or launch a new venture, this guide will tell you all you need to know about commercial loans.
What Are Commercial Fleet Loans?
A commercial truck loan is a specific type of financial product that companies with commercial fleets can apply for. Although they are sometimes called semi truck loans, commercial fleet loans can be used to purchase all sorts of equipment, including the following:
- Trailers
- Semi trucks
- Specialized trucks and equipment
- Fleet vans, cars or pickup trucks
Additionally, commercial loans may be able to fund significant repairs or facility upgrades. However, it is important to check with your lender when researching loans. Terms such as commercial interest rates and the length of the repayment period will vary depending on what sort of purchase you are financing.
How Do Commercial Fleet Loans Work?
Commercial fleet loans function quite similarly to private vehicle loans. However, they often involve a greater number of variables and a more extensive vetting process. The funding amount is usually much higher than that for a private vehicle loan.
The first step in obtaining a loan is determining what you want to purchase and how much it will cost. For instance, let’s say that you need to purchase three new semi trucks and trailers. The total cost of these pieces of equipment is approximately $600,000. Therefore, you would need to apply for a loan for this amount.
Alternatively, you could apply for a loan before finding equipment. If you are approved, the lender will issue a pre-approval letter, which you will present when finalizing your purchase.
Either way, the lender will need to conduct a credit check as part of the application process. They will review your company’s loan repayment history and other financial data. The lender will likely request information about your profit margins and total revenue to determine your ability to repay the loan.
Benefits of a Commercial Fleet Loan
Commercial fleet loans are a very popular tool for purchasing new equipment because this financial product offers several benefits over alternatives. By using a commercial loan to purchase equipment, you can access advantages such as the following:
More Lenient Pay Schedules
Most commercial lenders offer flexible repayment schedules. When applying for your loan, you will have the freedom to choose from several repayment term lengths.
The most common repayment term is 60 months. This term will keep your monthly installments relatively low while also allowing you to reduce the interest you pay.
However, you can also select a shorter or longer repayment term. For example, if you want to maintain higher cash flow, you might want to choose a longer repayment term of 72 to 84 months. This setup will increase the total interest you pay, but your monthly installment will be lower.
Lower Down Payments
A huge benefit of commercial loans is the low down payment amount. While monthly lease payments are typically lower than finance installments, the former loan product requires you to put up a huge down payment. This requirement is problematic, especially if you do not have a large volume of working capital.
Top lenders offer commercial loans with very low down payments. This setup means you can access the necessary equipment without putting your business in a financial bind.
Better Interest Rates
Commercial interest rates are usually quite competitive, especially if you have great credit. Rates available for commercial fleet loans typically outpace rates for personal loans and other financial products. This reality means that you could save thousands in interest payments over the life of your loan.
Quicker Money Disbursement
Need to finalize your purchase fast? If so, then that is just one more reason to use commercial loans. Once you are approved for your loan, the lender will send your funds to the seller quickly so you can take possession of your new equipment.
The Ability To Purchase New or Used Trucks
Purchasing a brand-new semi truck and trailer or another piece of fleet equipment is a great investment. However, there are instances where buying used vehicles may be the more financially responsible decision for your business. The good news is that commercial fleet loans allow you to do either.
With a commercial loan, you can purchase used trucks, brand new equipment or a combination thereof. This set-up will allow you to do what is right for your business without applying for multiple loans.
Accelerate Your Growth With a Commercial Truck Loan
If you are ready to accelerate the growth of an existing business or build your fleet from the ground up, you need funding. Commercial fleet loans provide a means for obtaining those funds.
Now all that is left to do is start shopping for equipment and applying for truck loans. If you would like to get a better gauge of your budget and what your monthly payments will be, we suggest using a truck loan calculator.
Should you already have a lender in mind, you can also contact them directly to obtain a quote. This approach will help you find fleet solutions that align with your budget and the needs of your business.
FAQ
Fleet debt is a broad term that refers to how much you owe on your commercial loan. As you pay down your loan, your fleet debt decreases.
Commercial fleet loans are used to finance the purchase of a fleet of vehicles and equipment.
Yes, but the lender will have a lien on the vehicle until you repay your loan. Once you pay off your loan, you will own your vehicle.
