Adding a new truck to your fleet will make it possible for you to handle more customers, take on more deliveries and ultimately grow your business. However, most companies cannot buy a new truck outright, so they need to finance one instead.
Commercial truck financing allows you to purchase a new truck and make payments on it, but in the meantime, you can use it to drive more business to your company. There are many commercial truck lenders out there, but not all of them are the same, and owner-operators should be careful about which lenders they choose.
Consider the credit score requirements, terms and customer service of a lender before you narrow down your options. Keep reading to better understand what you should consider when looking into semi truck financing.
Where Can I Get Commercial Truck Financing?
Commercial truck financing isn’t the same as getting an auto loan through your local bank. Instead, it’s more similar to a small business loan. But if it can’t be obtained from a bank, owner-operators may wonder how to get financing for a semi-truck.
Many companies help owner-operators get commercial fleet financing. These lenders are typically companies that solely work with businesses to provide funding for commercial vehicles. Like applying for any other type of loan, a commercial truck lender will check your credit score, but they might also ask you for the following information:
- Amount of time in business
- Business balance sheet
- Time with a CDL
- Personal and business tax returns
- EIN
- USDOT number
- FMCSA motor carrier number
The requirements will vary from lender to lender, but it’s important to have this information on hand when applying for financing in the event that your lender asks for it. After they process your information, you will be approved for funding, at which point they will offer you an interest rate and payment plan.
Eligibility and Rates
Most owner-operators can get approved for commercial truck financing even if they have poor credit. However, your credit score and years in business may impact your interest rate. Typically, interest rates for semi truck financing can be as low as 5% or as high as 30%.
Owner-operators with fewer years in business and lower credit scores will probably have to accept a higher interest rate for their loans. On the other hand, if you have a good credit score in the high 600s or above and your business has been in operation for a few years, you might receive an interest rate on the lower end of that 5% to 30% range.
Find the Best Option for You
There are many commercial vehicle lenders to choose from, but each one will have different minimum requirements. Therefore, it’s a good idea to research lenders and find one that can give you the lowest rates, fastest customer service and more. Here are a couple of things to consider when looking for a lender.
Lowest Rates
The higher the interest rate, the more money you’ll pay on your loan overall. That means you will have less capital going into your business. If you’re new to the company, a high interest rate may be the best way to break into industry, meaning it may be worthwhile.
But whether you’re a new trucker or an experienced owner-operator, you should shop around at a couple of different lenders to find the one that will give you the best rate and payment options. Remember that the lower your rate, the more money you will save.
Faster Funding
How quickly do you need the funds that will make it possible for you to purchase a truck? In most cases, it should only take about one month for you to get the money after you apply for the lender to supply the funds. If you need money sooner, you’ll need to find a lender who has a faster turnaround time.
Make sure you understand the process of getting funds so that you don’t miss out on a deal for a truck while waiting for your loan funds to arrive. It’s also a good idea to apply to a lender who will let you know if you’ve been approved within a couple of hours of applying.
Amazing Customer Service
Commercial fleet financing can be complicated and confusing, but it doesn’t have to be that way with a strong customer service team. Make sure you understand how to contact your lender’s customer service team and that you feel comfortable utilizing the service.
It might be a good idea to read Google Reviews and look into testimonials for potential lenders to see how other customers have rated their customer service teams. If you experience trouble with your loan, you’ll want to know that supportive and empathetic customer service members are on the other end of the phone, eage to assist you.
Lease to Own
Financing a commercial vehicle is not the only way to start or expand a fleet. However, it might not be the best option for certain drivers and owner-operators. Keep in mind that owner-operators will also have the opportunity to lease a commercial truck.
For a singular monthly payment, owner-operators can use their leased truck as though they are their own. Not only is there no interest rate, but leasing can also preserve credit, benefit you as a tax-deductible operating expense, allow for the easy upgrade of equipment and be approved faster than other types of loans.
Owner-operators can even lease-to-own a truck, which is when you purchase the truck at the end of the lease agreement for a lower price. However, you cannot claim the lease payments as a tax deduction if you plan to lease-to-own a truck.
However, a leased truck is not yours, nor is it a company asset. If you have a good credit score and you have also been in business for a few years, financing might give you a better rate. Plus, you will then own the truck when your loan period ends.
Importance of Understanding Your Financing Options
Commercial truck financing is a big deal. It can be a great way to either start or grow your business, too. However, you will be taking on additional monthly payments, so it’s important to understand your options before you make a decision.
Make sure you know the difference between leasing and financing a semi-truck. From there, you can then choose which option is best for you. If you are not sure if you’ll be able to make the payments while waiting 30 to 90 days until you are paid for your work, you might want to look into cash flow financing, which can help you get paid sooner.
There are also financing options that require a $0 down payment, which can be beneficial if you don’t have the savings to make a down payment as it is. Just remember that the more your loan covers, the more you’ll pay in interest.
Be Confident In Your Decision
Commercial truck financing can be intimidating, but it can also be the best way to expand your business or get started in the trucking industry. While purchasing a truck is a big decision, you should feel confident about your lender and terms. Always carefully research your term options and review the lender industry experience and high customer satisfaction.
FAQ
APR for commercial truck financing can be anywhere between 5% and 30%. Any rate within the 5% to 10% range is a very good APR.
Commercial trucks should be purchased with semi truck financing through a reputable commercial vehicle lender.
Semi truck financing plans typically last between 12 and 84 months, though the exact plan depends on your credit score and the number of years you have been in business.
